August WTI crude oil (CLQ24) on Monday closed down -0.83 (-1.00%), and Aug RBOB gasoline (RBQ24) closed down -2.12 (-0.83%).
Crude oil and gasoline prices Monday posted moderate losses. A stronger dollar on Monday was bearish for crude prices. Also, concerns receded that Hurricane Beryl would impede oil operations in the Gulf of Mexico after the hurricane made landfall in Texas Monday. In addition, signs of weak energy demand in China are undercutting crude prices. Losses in crude were limited as Monday'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.
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.
Monday's global economic news was weaker than expected and bearish for energy demand and crude prices. The Eurozone July Sentix investor confidence index fell -7.6 to a 4-month low of -7.3, weaker than expectations of -0.5. Weak German trade news is bearish for economic growth and energy demand after German May exports fell -3.6% m/m, weaker than expectations of -2.8% m/m and the biggest decline in 5 months. Also, German May imports fell -6.6% m/m, weaker than expectations of -1.0% m/m and the biggest decline in 17 months.
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 as hostilities escalate between Israel and Hezbollah. 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 and exports are bearish for oil prices. Russian crude production averaged 9.39 million bpd in May, which was +3.8% above its agreed target of 9.049 million bpd. Also, Russian fuel exports in the week to June 30 rose by +620,000 bpd to 3.67 million bpd, the most in two months.
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 June crude production fell -80,000 bpd to 26.98 million bpd.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of June 28 were -3.8% below the seasonal 5-year average, (2) gasoline inventories were -0.8% below the seasonal 5-year average, and (3) distillate inventories were -9.6% below the 5-year seasonal average. US crude oil production in the week ending June 28 was unchanged w/w at 13.2 million bpd, just below the recent 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.
