September WTI crude oil (CLU23) this morning is down -0.16 (-0.20%), and Sep RBOB gasoline (RBU23) is down -0.37 (-0.13%).
Crude oil and gasoline prices this morning are moderately lower. A stronger dollar today is weighing on energy prices. Also, concerns about China's economy are undercutting crude prices after China's July exports and imports fell more than expected. In addition, concern about the health of the U.S. banking sector is hammering stocks today and undercutting confidence in the economic outlook, which is bearish for energy demand and crude prices. Tightness in global oil supplies is limiting losses in crude prices.
Today's weak Chinese trade news signals weakness in China's economy and is negative for crude demand. China Jul exports fell -14.5% y/y, weaker than expectations of -13.2% y/y and the biggest decline in nearly 3-1/2 years. Also, Jul imports fell -12.4% y/y, weaker than expectations of -5.6% y/y and the biggest decline in 6 months.
Other news of weakness in Chinese crude demand is bearish for prices after government trade data showed 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.
Concern about the health of the U.S. banking sector is undercutting stocks and confidence in the economic outlook today and is bearish for crude after Moody's Investors Service lowered credit ratings for ten small and midsize U.S. banks and adopted a "negative" outlook for 11 other lenders.
Concern about disruptions to Russian crude exports is supportive for crude prices after Ukraine drones on Sunday attacked a Russian oil tanker in the Black Sea, a route that accounts for 20% of the oil that Russia sells daily on global markets, which elevates the risks to Russian crude supplies.
Crude prices have carryover support from last Thursday when Saudi Arabia and Russia said they would extend their crude production cuts. Saudi Arabia on Thursday 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, 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 July fell -900,000 bpd to a 1-3/4 year low of 27.79 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 July 30 dropped to a 7-month low of 2.98 million bpd.
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 -4.6% w/w to 103.05 million bbl as of August 4.
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.
Last 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 August 4 fell by -4 rigs to a 17-month low of 525 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.
