February WTI crude oil (CLG25) Thursday closed up +1.41 (+1.97%), and February RBOB gasoline (RBG25) closed up +0.0427 (+2.13%).
Crude oil and gasoline prices rallied Thursday, with crude oil posting a 2-1/2 month high and gasoline posting a 6-week high. Signs of US economic strength support energy demand and crude prices after weekly jobless claims fell to an 8-month low, and the Dec S&P manufacturing PMI was revised higher. Also, strong US jet fuel demand is bullish for crude after US jet fuel demand in October rose to a 7-year monthly high. Crude prices fell back from their best levels after the dollar index (DXY00) rallied to a 2-year high and after weekly US EIA crude inventories fell less than expected.
US economic news on Friday was better than expected and supported crude prices. Weekly initial unemployment claims unexpectedly fell -9,000 to an 8-month low of 211,000, showing a stronger labor market than expectations of an increase to 221,000. Also, the Dec S&P manufacturing PMI was revised upward by +1.1 to 49.4 from the previously reported 48.3.
Strength in the crude crack spread is bullish for crude prices after the crack spread Thursday climbed to a 5-week high, encouraging refiners to boost their crude purchases and refine the crude into gasoline and distillates.
Signs of strong US jet fuel demand support crude prices after the EIA reported US Oct jet fuel demand rose +1.9% y/y to 1.73 million bpd, the highest monthly level in 7 years.
The outlook for new sanctions on Iranian and Russian crude exports could limit global oil supplies and is bullish for prices. Mike Walz, President-elect Trump's pick for national security adviser, vowed a return to "maximum pressure" on Iran, and the Biden administration said it is considering new, harsher sanctions on Russian crude oil.
A drop 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 -16% w/w to 60.27 million bbl in the week ended December 27.
Crude found support last month after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Nov crude production rose +120,000 bpd to 27.02 million bpd.
Crude oil demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Nov apparent oil demand fell -2.14% y/y to 14.013 million bpd, and Jan-Nov apparent oil demand was down -3.26% y/y to 13.996 million bpd. China is the world's second-largest crude consumer.
A decline in Russian crude exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -170,000 bpd to 2.97 million bpd in the week to December 15.
Thursday's weekly EIA crude report was mostly bearish for crude and products. EIA crude inventories fell -1.18 million bl, a smaller draw than expectations of -2.5 million bbl. Also, EIA gasoline supplies rose +7.2 million bbl, more than expectations of +1.0 million bbl. In addition, EIA distillate stockpiles unexpectedly rose +6.41 million bbl versus expectations of -1.15 million bbl draw. On the positive side, crude supplies at Cushing, the delivery point of WTI futures, fell -142,000 bbl to a 14-month low.
Thursday's EIA report showed that (1) US crude oil inventories as of December 27 were -5.3% below the seasonal 5-year average, (2) gasoline inventories were -0.4% below the seasonal 5-year average, and (3) distillate inventories were -5.9% below the 5-year seasonal average. US crude oil production in the week ending December 27 fell -0.1% w/w to 13.573 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported last Friday that active US oil rigs in the week ending December 27 were unchanged at 483 rigs, modestly above the 2-3/4 year low of 477 rigs posted last month. 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.
