August WTI crude oil (CLQ24) Wednesday closed up +0.69 (+0.85%), and Aug RBOB gasoline (RBQ24) closed down -2.40 (-0.95%).
Crude oil and gasoline prices settled mixed on Wednesday. Crude prices Wednesday rebounded from a 1-1/2 week low and moved higher after weekly EIA crude inventories unexpectedly declined. Also, a weaker dollar Wednesday was bullish for energy prices. In addition, Wednesday's rally in the S&P 500 to a new record high shows confidence in the economic outlook that is positive for energy demand and crude prices. On the negative side for crude was Wednesday's decline in the crude crack spread to a 2-1/2 week low and a Reuters report that said the BOJ will likely cut this year's economic growth forecast when it meets later this month.
Weakness in the crude crack spread discourages refiners from boosting their crude purchases and is bearish for crude after Wednesday's crack spread fell to a 2-1/2 week low.
Reduced crude exports from Russia are limiting global oil supplies and are supporting oil prices. According to vessel-tracking data compiled by Bloomberg, Russia's crude exports in the week to July 7 fell by -990,000 bpd to 2.67 million bpd, the lowest in over five months.
Weakness in crude demand in China, the world's second-largest crude consumer, is bearish for oil prices. Data compiled by Bloomberg shows that in the week ending June 28, only 86 global oil tankers indicated China as their next destination in the coming three months, five fewer than the prior week and the lowest weekly tally since August of 2022.
Crude oil prices have underlying support from the Hamas-Israel conflict. Israel's military continues to conduct operations in Gaza, and there is also concern that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Meanwhile, ongoing attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
Higher than expected Russian crude output is bearish for oil prices. Russian crude production averaged 9.078 million bpd in June, above its agreed target of 9.049 million bpd.
An increase in crude oil in floating storage is bearish for prices. Monday's weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week rose +11% w/w to 86.58 million bbl as of July 5.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. OPEC+, on June 2, extended the 2 million bpd of voluntary crude production cuts into Q3 but said they would gradually phase out the cuts over the following 12 months, beginning in October. OPEC pledged to extend its crude production cap at about 39 million bpd to the end of 2025. Also, the UAE was given a 300,000 bpd boost to its production target for 2025.
A decrease in OPEC crude output is positive for oil prices. OPEC's June crude production fell -80,000 bpd to 26.98 million bpd.
Wednesday's weekly EIA crude report is mixed for crude prices. On the bullish side, EIA crude inventories unexpectedly fell -3.44 million bbl versus expectations for a +1.0 million bbl build. Also, EIA gasoline supplies fell -2.0 million bbl, a larger draw than expectations of -1.0 million bbl. In addition, crude stockpiles at Cushing, the delivery point for WTI futures, fell -702,000 bbl. On the bearish side, EIA distillate inventories rose +4.88 million bbl, a larger build than expectations of +500,000 bbl. Also, US crude production in the week ended July 5 rose to 13.3 million bpd and matched a record high.
Wednesday's EIA report showed that (1) US crude oil inventories as of July 5 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -1.1% below the seasonal 5-year average, and (3) distillate inventories were -8.2% below the 5-year seasonal average. US crude oil production in the week ending July 5 rose +0.8% w/w and matched a record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending July 5 were unchanged at a 2-1/2 year low of 479 rigs. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
