December WTI crude oil (CLZ25) today is down -0.39 (-0.64%), and December RBOB gasoline (RBZ25) is up +0.0023 (+0.12%).
Crude oil and gasoline prices gave up an early advance today and are mixed. Crude prices retreated today after weekly EIA crude supplies unexpectedly increased. Also, today's rally in the dollar index (DXY00) to a 5.25-month high is bearish for energy prices. Gasoline found support today after EIA gasoline inventories tumbled to an 11-year low. Also, today's better-than-expected global economic news is supportive of energy demand and crude prices.
Better-than-expected global economic news is positive for energy demand and crude prices. The US Oct ADP employment change rose +42,000, stronger than expectations of +30,000. Also, the US Oct ISM services index rose by +2.4 points to 52.4, stronger than expectations of 50.8 and the fastest pace of expansion in 8 months. In addition, the Eurozone Oct S&P composite PMI was revised upward by +0.3 to 52.5 from the previously reported 52.2, the strongest pace of expansion in nearly 2.5 years. Finally, German Sep factory orders rose +1.1% m/m, stronger than expectations of +0.9% m/m and the biggest increase in 5 months.
Strength in the crude crack spread supports crude prices, after the spread rose to a 2.5-month high today. The higher crack spread encourages refiners to increase their crude purchases and refine them into gasoline and distillates.
Oil prices also have support on recent reports that the US military may be on the verge of launching military strikes on Venezuela, which is the world's 12th largest oil producer.
OPEC+ at its meeting on Sunday announced that members will raise production by 137,000 bpd for December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. The IEA in mid-October forecasted a record global oil surplus of 4.0 million bpd for 2026. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC's September crude production rose by +400,000 bpd to 29.05 million bpd, the highest in 2.5 years.
Reduced crude exports from Russia are supportive of oil prices. Ukraine has targeted at least 28 Russian refineries over the past three months, exacerbating a fuel crunch in Russia and limiting Russia's crude export capabilities. Ukrainian drone and missile attacks on Russian refineries and oil export terminals curbed Russia's total seaborne fuel shipments to 1.88 million bpd in the first ten days of October, the lowest average in over 3.25 years, and have knocked out 13% to 20% of Russia's refining capacity by the end of October, curbing production by as much as 1.1 million bpd. New US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.
Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -11% w/w to 86.91 million bbls in the week ended October 31.
Today's weekly EIA inventory report is mixed for crude and products. On the positive side, EIA gasoline supplies fell -4.7 million bbl to an 11-year low, a larger draw than expectations of -1.8 million bbl. Conversely, EIA crude inventories unexpectedly rose +5.2 million bbl versus expectations of a -286,000 bbl draw. Also, EIA distillate stockpiles fell by -643,000 bbl, a smaller draw than expectations of -2.5 million bbl.
Today's EIA report showed that (1) US crude oil inventories as of October 31 were -5.3% below the seasonal 5-year average, (2) gasoline inventories were -4.3% below the seasonal 5-year average, and (3) distillate inventories were -8.8% below the 5-year seasonal average. US crude oil production in the week ending October 31 rose +0.1% w/w to a record high of 13.651 million bpd.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ending October 31 fell by -6 rigs to 414 rigs, modestly above the 4-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 5.5-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. For more information please view the Barchart Disclosure Policy here.
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