December WTI crude oil (CLZ24) Friday closed up +1.59 (+2.27%), and December RBOB gasoline (RBZ24) closed up +0.0447 (+2.25%).
Crude and gasoline prices settled moderately higher on Friday, with gasoline posting a 1-week high. Ramped-up Middle East tensions are boosting crude prices. Also, stronger-than-expected global economic news Friday was positive for energy demand and crude prices.
Heightened tensions in the Middle East could disrupt the region's crude supplies and is bullish for prices. The US signaled to Saudi Arabia it was ready to help defend the kingdom in the event of an escalation of the Middle East conflict. Also, the New York Times reported Friday that Iran has ordered its armed forces to be prepared for war. The markets continue to wait for Israel's retaliation against Iran for its missile attack on Israel on October 1.
Friday's global economic news was better than expected, supporting energy demand and crude prices. US Sep capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.1% m/m. Also, the University of Michigan US Oct consumer sentiment index was revised upward by +1.6 to a 6-month high of 70.5, stronger than expectations of 69.0. In addition, the German Oct IFO business climate rose +1.1 to 86.5, stronger than expectations of 85.6.
A decline in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -5.4% w/w to 58.8 million bbl in the week ended October 18.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's total apparent oil demand in Sep fell -6.98% y/y to 14.176 million bpd, and total Chinese oil demand this year (Jan-Sep) is down -3.8% y/y to 13.99 million bpd.
A bearish factor for crude oil is ramped-up crude output in Libya after the resolution of a political standoff that had curbed the country's crude production and exports. On October 13, Libya's National Oil Corp said that Libya's crude production rose to 1.3 million bpd, the most in two months, which boosted global crude supplies.
Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand. However, the Financial Times reported on September 26 that Saudi Arabia is ready to abandon its unofficial oil price target of $100 a barrel to regain its market share and is committed to returning its crude production as planned on December 1. OPEC crude production in September fell -480,000 bpd to an 8-month low of 26.51 million bpd
An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +150,000 bpd to 3.46 million bpd in the week to October 20. Conversely, Russia's Energy Ministry reported last Wednesday 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 October 18 were -3.6% below the seasonal 5-year average, (2) gasoline inventories were -2.9% below the seasonal 5-year average, and (3) distillate inventories were -9.0% below the 5-year seasonal average. US crude oil production in the week ending October 18 was unchanged w/w at a record 13.5 million bpd.
Baker Hughes reported Friday that active US oil rigs in the week ending October 25 fell by -2 rigs to 480 rigs, just above the 2-1/2 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.
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.
