October WTI crude oil (CLV23) Friday closed up +1.92 (+2.30%), and Oct RBOB gasoline (RBV23) closed up +2.53 (+0.99%).
Crude oil prices Friday closed sharply higher, with crude rising to a 9-1/2 month nearest-futures high. Crude prices extended Thursday's sharp gains on a report that Russia has agreed with OPEC+ on further output restrictions. Bloomberg News reported Thursday that Russia will announce next week that it has agreed with OPEC+ on further cuts in its oil exports into October. Russia has already announced a cut of 300,000 bpd of output cuts for September.
Stronger-than-expected manufacturing activity in China and the U.S. is bullish for energy demand and crude prices. The U.S. Aug ISM manufacturing index rose +1.2 to a 6-month high of 47.6, stronger than expectations of 47.0. Also, the China Aug Caixin manufacturing PMI unexpectedly rose +1.8 to 51.0, stronger than expectations of a decline to 49.0 and the fastest pace of expansion in 6 months.
Crude oil prices have continued support from Wednesday's news that weekly EIA crude inventories fell more than expected to an 8-month low.
Weakness in the crude crack spread is bearish for oil prices. Friday's crack spread dropped to a 3-1/2 month low, discouraging refiners from purchasing crude oil and refining it into gasoline and distillates.
An increase in Iranian crude exports is boosting global supplies and is bearish for oil prices. According to TankerTrackers.com, Iranian crude exports rose to a 5-year high of 2.2 million bpd during the first 20 days of August, with most of the crude going to China.
A negative factor for crude prices is the progress made in Iran-U.S. relations that could lead to higher crude exports from Iran after Iran said the recent deal with the U.S. on the release of prisoners and frozen Iranian funds could lead to diplomacy in other areas, including its nuclear program. An agreement on Iran's nuclear program could eventually prompt the U.S. and its allies to remove sanctions on Iranian crude exports, boosting global crude supplies.
In a bearish factor, China's July crude imports fell -19% m/m to 10.33 million bpd, the smallest volume in 6 months. Also, Vortexa said China's onshore crude inventories have expanded to a record 1.02 billion bbl as of July 27.
A decline in crude demand in India, the world's third-biggest crude consumer, is bearish for oil prices. India's July crude oil imports fell -6.3% y/y to 19.3 MMT, the lowest in 8 months.
Crude prices have carryover support from last month when Saudi Arabia and Russia said they would extend their crude production cuts. 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. Meanwhile, 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 cut its crude output by 500,000 bpd in August. OPEC crude production in August was little changed, rising +40,000 bpd to 27.82 million bpd, recovering slightly from July's 1-3/4 year low of 27.78 million bpd.
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 Aug 18 dropped to 2.29 million bpd, the lowest daily average in ten months.
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 -23% w/w to 82.34 million bbl as of Aug 25.
Wednesday's weekly EIA report showed that (1) U.S. crude oil inventories as of Aug 25 were -3.5% below the seasonal 5-year average, (2) gasoline inventories were -5.0% below the seasonal 5-year average, and (3) distillate inventories were -15.2% below the 5-year seasonal average. U.S. crude oil production in the week ended Aug 25 was unchanged w/w at 12.8 million bpd, the most in over three years. U.S. crude oil production is modestly below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported Friday that active U.S. oil rigs in the week ended Sep 1 were unchanged at a 17-month low of 512 rigs. That is well below the 3-1/4 year high of 627 rigs posted on Dec 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.
More Energy News from Barchart
- 3 Green Energy Stocks Short Sellers Are Targeting
- Crude Extends Thursday's Rally on Report Russia Will Extend Its Export Cuts
- Nat-Gas Prices Fall Back on Bearish EIA Report
- Crude Rallies on Report Russia Will Extend Its Export Cuts
