Crude Settles Moderately Higher on Tight Global Oil Supplies

October WTI crude oil (CLV23) on Friday closed up +0.64 (+0.74%), and Oct RBOB gasoline (RBV23) closed up +3.07 (+1.17%).

Crude oil and gasoline prices Friday posted moderate gains, with gasoline climbing to a 1-1/2 week high.  A weaker dollar Friday was supportive of energy prices.  Crude also has carryover support from Tuesday when Saudi Arabia and Russia announced that they will extend their respective crude production cuts until the end of the year.  In addition, crude prices have support from Thursday's bullish EIA report that showed U.S. crude inventories fell more than expected to a 9-month low.  Crude prices fell back from their best levels Friday after the dollar index recovered from early losses and moved higher.

Crude prices found support after Saudi Arabia on Tuesday said it would maintain its unilateral crude production cut of 1.0 million bpd through December.  The move will hold Saudi Arabia's crude output at about 9 million bpd, the lowest level in three years.  Also, Russia on Tuesday announced it would also maintain its 300,000 bpd cut in crude production through December.

Strength in the crude crack spread is bullish for oil prices as the crack spread Friday rose to a 1-week high.  The higher crack spread encourages refiners to boost their crude purchases and refine the crude into gasoline and distillates.

An increase in Iranian crude exports is boosting global supplies and is bearish for oil prices.  According to TankerTrackers.com, Iranian crude exports rose to a 5-year high of 2.2 million bpd during the first 20 days of August, with most of the crude going to China.

A negative factor for crude prices is the progress made in Iran-U.S. relations that could lead to higher crude exports from Iran after Iran said the recent deal with the U.S. on the release of prisoners and frozen Iranian funds could lead to diplomacy in other areas, including its nuclear program.  An agreement on Iran's nuclear program could eventually prompt the U.S. and its allies to remove sanctions on Iranian crude exports, boosting global crude supplies.

A decline in crude demand in India, the world's third-biggest crude consumer, is bearish for oil prices.  India's July crude oil imports fell -6.3% y/y to 19.3 MMT, the lowest in 8 months.

OPEC crude production in August was little changed, rising +40,000 bpd to 27.82 million bpd, recovering slightly from July's  1-3/4 year low of 27.78 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 Aug 18 dropped to 2.29 million bpd, the lowest daily average in ten months.

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 -0.9% w/w to 84.97 million bbl as of Sep 1, the lowest in 7 months.

Thursday's EIA report showed that (1) U.S. crude oil inventories as of Sep 1 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were -5.9% below the seasonal 5-year average, and (3) distillate inventories were -14.4% below the 5-year seasonal average.  U.S. crude oil production in the week ended Sep 1 was unchanged w/w at 12.8 million bpd, the most in over three years.  U.S. crude oil production is modestly below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported Friday that active U.S. oil rigs in the week ended Sep 8 rose +1 to 513 rigs, just above the previous week's 17-month low of 512 rigs.  That is well below the 3-1/4 year high of 627 rigs posted on Dec 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.

More Energy News from Barchart

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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