September WTI crude oil (CLU23) on Thursday closed up +2.06 (+2.59%), and Sep RBOB gasoline (RBU23) closed down -1.11 (-0.40%).
Crude oil and gasoline prices Thursday settled mixed. Crude prices recovered from a 1-week low Thursday and rallied sharply after Saudi Arabia said it would extend its 1 million bpd production cut through September. Dollar weakness also boosted energy prices after the dollar index fell from a 3-1/2 week high and turned lower.
Crude prices rallied Thursday after Saudi Arabia said it will extend its 1 million bpd cut in crude production into September and said its crude output may "be extended, or extended and deepened." The cut in Saudi production keeps its crude output at about 9 million bpd, the lowest level in several years. Also, OPEC crude production in July fell -900,000 bpd to a 1-3/4 year low of 27.79 million bpd. The OPEC+ Joint Ministerial Monitoring Committee will hold an online review Friday to gauge the impact of the group's supply reductions.
Crude prices extended their gains Thursday after Russian Deputy Prime Minister Novak said Russia "will continue to voluntarily reduce its oil supply in September by 300,000 bpd" to balance the market. Russia pledged to cut its crude output by 500,000 bpd in August.
A bullish factor for crude oil is a decline in Russian crude shipments. Vessel-tracking data monitored by Bloomberg showed Russian crude oil shipments in the four weeks to July 30 dropped to a 7-month low of 2.98 million bpd.
Weakness in the crude crack spread is bearish for oil prices after the crack spread Thursday fell to a 1-week low. The weaker crack spread discourages refiners from purchasing crude oil and refining it into gasoline and distillates.
A decline in crude in floating storage is bullish 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 fell -2.2% w/w to 105.06 million bbl as of July 28.
An improvement in Chinese crude demand is bullish for prices after government trade data showed China's June crude imports rose +4.6% m/m to 12.72 million bpd, the most in three years.
A decline in crude demand in India, the world's third-biggest crude consumer, is bearish for oil prices. India's Jun crude oil imports fell -1.3% y/y to 19.7 MMT, the lowest in 7 months.
Wednesday's weekly EIA report showed that (1) U.S. crude oil inventories as of July 28 were -1.6% below the seasonal 5-year average, (2) gasoline inventories were -6.3% below the seasonal 5-year average, and (3) distillate inventories were -14.6% below the 5-year seasonal average. U.S. crude oil production in the week ended July 28 was unchanged w/w at 12.2 million bpd. U.S. crude oil production is well below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended July 28 fell by -1 rig to a 16-1/2 month low of 529 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 2, 2022. Still, U.S. active oil rigs are more than triple the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.
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.
