January WTI crude oil (CLF25) Friday closed up +1.14 (+1.63%), and January RBOB gasoline (RBF25) closed up +0.0132 (+0.66%).
Crude oil and gasoline prices settled moderately higher on Friday, with crude climbing to a 2-week high. The escalation of global geopolitical tensions is supportive of crude oil. Russia launched a new hypersonic missile into the city of Dnipro on Thursday. Also, Iran said Friday it will increase its nuclear fuel-making capacity after being censured by the International Atomic Energy Agency.
Crude oil prices also saw support from Friday's rally in the S&P 500 to a 1-week high, which showed confidence in the economic outlook and supports energy demand and crude prices. Friday's rally in the dollar index (DXY00) to a 2-year high limited gains in crude.
Escalation of the Ukraine-Russian war is underpinning crude prices. Russia launched a new hypersonic missile into the city of Dnipro, following Ukraine's expanded use of Western-provided long-range missiles. On Wednesday, Ukraine fired British cruise missiles at military targets inside Russia for the first time after the UK government approved the action in response to Russia deploying North Korean troops in the Ukraine war. Earlier this week, Ukraine carried out its first missile strikes on a border region in Russia using US-supplied missiles, which prompted Russian President Putin to approve an updated nuclear doctrine that expands the conditions for Russia to use atomic weapons, including in response to a conventional attack on its soil.
An increase in tensions over Iran's nuclear program is also pushing crude prices higher after Iran said Friday that it will increase its nuclear fuel-making capacity after it was censured by the United Nations atomic watchdog. Iran's action may push the Trump administration to impose new sanctions on Iranian crude, reducing global oil supplies.
Weakness in the crude crack spread is bearish for oil prices. Friday's crack spread fell to a 2-week low, discouraging refiners from purchasing crude and refining it into gasoline or distillates.
A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -14% w/w to 50.97 million bbl in the week ended November 15.
Concerns that Middle East hostilities could escalate are bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran. An escalation of hostilities between Iran and Israel could widen the conflict in the Middle East and disrupt the region's crude supplies.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd. China is the world's second-largest crude consumer.
A decline in Russian crude exports is bullish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -740,000 bpd to a 4-month low of 2.83 million bpd in the week to November 17. Separately, Russia's Energy Ministry reported on October 23 that Russia's Sep crude production was 8.97 million bpd, down -13,000 bpd from Aug and just below the 8.98 million bpd output target it agreed to with OPEC+.
Wednesday's EIA report showed that (1) US crude oil inventories as of November 15 were -4.5% below the seasonal 5-year average, (2) gasoline inventories were -4.0% below the seasonal 5-year average, and (3) distillate inventories were -4.5% below the 5-year seasonal average. US crude oil production in the week ending November 8 fell -0.7% w/w to 13.4 million bpd, falling back from the record 13.5 million bpd in the prior week.
Baker Hughes reported Friday that active US oil rigs in the week ending November 22 rose +1 rig to 479 rigs, just above the 2-3/4 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
