May WTI crude oil (CLK23) on Wednesday closed down -0.10 (-0.12%), and May RBOB gasoline (RBJ23) closed up +8.30 (+3.03%).
Crude oil and gasoline prices Wednesday settled mixed. A stronger dollar Wednesday (DXY00) weighed on crude prices. Also, signs of a slowdown in the U.S. economy are negative for energy demand and crude prices after Wednesday's reports on Mar ADP employment and Mar ISM services were weaker than expected. However, losses in crude were limited, and gasoline prices rose on a bullish weekly EIA inventory report.
Signs of weakness in the U.S. economy are negative for energy demand and crude prices. Wednesday's economic reports showed the Mar ADP employment change rose+145,000, weaker than expectations of +210,000. Also, the Mar ISM services index fell -3.9 to 51.2, weaker than expectations of 54.4.
Another bearish factor for crude prices is the resumption of Iraqi crude exports from the Turkish port of Ceyhan. On Tuesday, the Iraqi government and Kurdish officials said they would sign an agreement to allow the resumption of 400,000 bpd of oil exports from the Turkish port of Ceyhan. The crude exports were halted last week after Iraq won an arbitration case from the International Chamber of Commerce that said Turkey violated a 1973 pipeline transit agreement by allowing crude from the Kurdish region to be exported without Iraqi government consent.
Crude prices surged Monday after OPEC+ on Sunday announced a surprise oil production cut of more than 1 million bpd starting May 1. Saudi Arabia said the cuts were a "precautionary measure aimed at supporting the stability of the oil market." OPEC Mar crude production fell -80,000 bpd to 29.16 million bpd.
The outlook for stronger Chinese crude oil demand is bullish for prices. China National Petroleum Corp, the country's largest refiner, predicts that oil demand in China may expand this year by +5.1% to 756 MMT as the country emerges from the pandemic. However, oil demand in China has recently been weak. China car sales in Jan-Feb fell -9.4% y/y and international flights from China were at only 22% of pre-pandemic levels as of March 16.
In a bearish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +5.4% w/w to 104.60 million bbl in the week ended March 31.
Rising crude demand in India is bullish for oil prices. India's oil ministry reported on March 22 that India Feb crude oil imports rose +8.5% y/y to 19.1 MMT, the most in seven months.
Wednesday's weekly EIA report was bullish for crude and its products. EIA crude inventories fell -3.74 million bbl, a larger draw than expectations of -1.7 million bbl. Also, EIA gasoline supplies fell -4.1 million bbl, more than expectations of -2.0 million bbl. In addition, EIA distillate stockpiles fell -3.6 million bbl, a bigger draw than expectations of -1.0 million bbl. Finally, crude supplies at Cushing, the delivery point of WTI futures, fell by -970,000 bbl.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of March 31 were +4.1% above the seasonal 5-year average, (2) gasoline inventories were -6.4% below the seasonal 5-year average, and (3) distillate inventories were -11.4% below the 5-year seasonal average. U.S. crude oil production in the week ended March 31 was unchanged at 12.2 million bpd, only 0.9 million bpd (-6.9%) 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 March 31 fell by -1 rig to 592 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
