December WTI crude oil (CLZ23) on Monday closed +1.71 (+2.25%), and Dec RBOB gasoline (RBZ23) closed +0.0405 (+1.85%).
Crude oil and gasoline prices closed moderately higher on Monday. Monday’s slide in the dollar index (DXY00) to a 2-1/2-month low supported gains in energy prices. Crude prices also rose on concern that OPEC+ may extend and even deepen its crude production cuts when the group meets this weekend. Monday’s rally in the S&P 500 to a 2-1/2 month high shows confidence in the economic outlook and is another positive for energy demand and crude prices.
Crude prices have support on expectations that OPEC+ will at least reaffirm existing crude production cuts for next year. OPEC+ will meet on November 25-26 in Vienna to discuss an extension of its crude production cuts.
Geopolitical concerns have increased shipping risks in the Middle East because of the Israel-Hamas war and are supporting crude prices after an Israeli ship chartered by Japan was seized on Sunday in the Red Sea by Iran-backed Houthi rebels. The rebels said they support Hamas in the conflict and will continue attacks on Israeli territories and ships.
Expectations of an increase in travel in the US during the Thanksgiving holiday are supporting fuel demand and crude prices. According to a forecast by the American Automobile Association (AAA), 55.4 million Americans are expected to travel 50 miles or more from home during the holiday, the third largest in records since 2000.
An increase in crude in floating storage is bearish for prices. Vortexa’s weekly data from Monday showed that the amount of oil held globally on tankers that have been stationary for at least a week rose +24% w/w to 87.987 million bbl as of November 17.
Increased crude consumption in India, the world’s third largest crude consumer, is bullish for oil prices after India’s consumption of petroleum products in October rose +3.7% y/y to 19.3 MMT, a five-month high.
An increase in Russian crude exports is bearish for oil prices. Tanker tracking data monitored by Bloomberg show that 3.2 million bpd of crude was shipped from Russian ports in the four weeks to Nov. 12, near the highest in four months.
In a bearish factor for crude oil, the United States on Oct. 18 said it would ease sanctions on Venezuela’s oil exports for six months in exchange for steps to ensure the country holds fair presidential elections next year. An easing of sanctions would put additional crude supplies on the global market with some analysts estimating around 200,000 bpd of additional supplies.
The tension in the oil market is expected to continue due to the extension of OPEC+ production cuts. Saudi Arabia recently said it would maintain its unilateral crude output of 1.0 million bpd until December. The move will keep Saudi Arabia’s crude output at about 9 million bpd, the lowest level in three years. Russia also recently announced that it would maintain its 300,000 bpd cut in crude output until December. OPEC Oct crude output was little changed, rising +50,000 bpd to 28.08 million bpd.
Last Wednesday’s EIA report showed that (1) US crude oil inventories as of November 10 were -2.4% below the seasonal 5-year average, (2) gasoline inventories were -1.2% below the seasonal 5 -annual average, and (3) distillate inventories were -13.6% below the 5-year seasonal average. US crude oil production in the week ended November 10 was unchanged w/w at a record high of 13.2 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ended November 17 rose by +6 rigs to 500 rigs, recovering slightly from the previous week’s 1-3/4-year low of 494 -platforms. The US oil rig count has fallen this year after moving sharply higher during 2021-22 from the 18-year pandemic low of 172 rigs posted in August 2020 to a 3-1/2-year high of 627 rigs in December 2022.
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