October WTI crude oil (CLV25) on Thursday closed down -0.49 (-0.77%), and October RBOB gasoline (RBV25) closed down -0.0025 (-0.12%).
Crude oil and gasoline prices closed lower, with crude posting a 2-week low. Crude prices added to Wednesday’s losses on concerns of a global oil supply glut following a report from Reuters that OPEC+ is considering an increase in its crude production levels. Crude prices remained lower after weekly EIA crude inventories unexpectedly rose. Losses in gasoline prices were limited after weekly EIA gasoline supplies fell more than expected to a 9-month low.
Thursday’s global economic news was mainly weaker-than-expected, a negative factor for energy demand and crude prices. The US Aug ADP employment change rose +54,000, weaker than expectations of +68,000. Also, US weekly initial unemployment claims rose by +8,000 to a 10-week high of 237,000, showing a weaker labor market than expectations of 230,000. In addition, Eurozone July retail sales fell -0.5% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 13 months. On the positive side, the US Aug ISM services index rose +1.9 to 52.0, stronger than expectations of 51.1 and the strongest pace of expansion in six months.
Reduced Russian crude output is tightening global oil supplies and is supportive of prices. Ukrainian drone and missile attacks on Russian refineries have curbed Russia’s crude-processing runs to 5.09 million bpd in the first 27 days of August, the lowest monthly average in over 3.25 years.
Crude prices have support on concerns that the ongoing war in Ukraine could lead to additional sanctions on Russian energy exports, reducing global oil supplies. US Treasury Secretary Bessent said Tuesday that the US “will be examining sanctions on Russia very closely this week” due to the ongoing war in Ukraine. President Trump has threatened “very big consequences” if Russia doesn’t come to the negotiating table. Last Friday, German Chancellor Merz and French President Macron called for secondary sanctions on Russia for its war in Ukraine. They said they will push for measures targeting “companies from third countries that support Russia’s war.”
A decrease 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 -18% w/w to 72.67 million bbl in the week ended August 29.
Concerns about higher OPEC production are negative for crude prices after OPEC+ on August 2 endorsed an additional 547,000 bpd increase in its crude production for September 1. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026. OPEC+ has 1.66 million bpd of supplies that are currently due to remain offline until late 2026. OPEC+ will meet again on September 7 to discuss crude production levels. OPEC Aug crude production rose by +400,000 bpd to 28.55 million bpd, the highest in over two years.
Thursday’s weekly EIA report was mainly bearish for crude and products. EIA crude inventories unexpectedly rose +2.4 million bbl versus expectations of a -1.9 million draw. Also, EIA distillate stockpiles unexpectedly rose +1.7 million bbl versus expectations of a -1.7 million draw. In addition, crude supplies at Cushing, the delivery point of WTI futures, rose by +1.59 million bbl. On the positive side, EIA gasoline inventories fell -3.8 million bbl to a 9-month low, a larger draw than expectations of -1.4 million bbl.
Thursday’s weekly EIA report showed that (1) US crude oil inventories as of August 29 were -3.8% below the seasonal 5-year average, (2) gasoline inventories were -1.6% below the seasonal 5-year average, and (3) distillate inventories were -13.2% below the 5-year seasonal average. US crude oil production in the week ending August 29 fell by -0.1% w/w to 13.423 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ending August 29 rose by +1 to 412 rigs, just above the 3.75-year low of 410 rigs from August 1. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.25-year high of 627 rigs reported 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. This article was originally published on Barchart.com
