Sep WTI crude oil (CLU24) on Wednesday closed up +2.03 (+2.77%), and Sep RBOB gasoline (RBU24) closed up +3.11 (+1.34%).
Crude oil and gasoline prices posted moderate gains Wednesday. Crude oil prices rose Wednesday on concern that an expected retaliatory attack by Iran against Israel could spark an escalation of Middle Eastern hostilities. Crude prices added to their gains Wednesday after weekly EIA crude inventories fell more than expected to a 6-month low. Dollar strength on Wednesday limited gains in energy prices.
Crude prices are supported by fears of a retaliatory attack by Iran against Israel, which could escalate the conflict in the Middle East and disrupt the region's crude oil supplies. Iran has threatened to retaliate against Israel for last week's assassination of a Hamas leader in Tehran. Israel's military continues to conduct operations in Gaza, and there is the risk 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.
Global economic news Wednesday was weaker than expected and bearish for energy demand and crude prices. China's July exports rose +7.0% y/y, weaker than expectations of +9.5% y/y and a bearish factor for global growth. Also, German June exports fell -3.4% m/m, weaker than expectations of -1.5% m/m and the biggest decline in 6 months. In addition, Japan's June leading index CI fell -2.6 to a 14-month low of 108.6, weaker than expectations of 108.8.
A plunge in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -31% w/w to 56.66 million bbl in the week ended August 2, the lowest in more than four years.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. On June 2, OPEC+ 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. In June, OPEC crude production fell -80,000 bpd to 26.98 million bpd.
Wednesday's weekly EIA report was mixed for crude and products. On the bullish side, EIA crude inventories fell -3.73 million bbl to a 6-month low, a larger draw than expectations of a decline of -1.8 million bbl. Conversely, EIA gasoline supplies unexpectedly rose +1.34 million bbl versus expectations of a -1.8 million bbl draw. Also, US crude production in the week ended August 2 rose +0.8% w/w to a record 13.4 million bpd. In addition, crude stockpiles at Cushing, the delivery point for WTI crude, rose +579,000 bbl.
Wednesday's EIA report showed that (1) US crude oil inventories as of August 2 were -5.6% below the seasonal 5-year average, (2) gasoline inventories were -2.0% below the seasonal 5-year average, and (3) distillate inventories were -6.5% below the 5-year seasonal average. US crude oil production in the week ending August 2 rose +0.8% w/w to a new record high of 13.4 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ending August 2 were unchanged at 482 rigs, modestly above the 2-1/2 year low of 477 rigs posted in the week ending July 19. 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.
