Crude Oil and Gasoline Prices Climb Amid Middle East Tensions
Current trends show November WTI crude oil (CLX24) up +1.64 (+2.32%), while November RBOB gasoline (RBX24) has risen by +4.97 (+2.47%).
Market Context
Crude and gasoline prices are experiencing a rally for a second consecutive day, reaching one-week highs. This increase is largely driven by growing tensions in the Middle East, raising concerns about potential disruptions to crude supplies in the region. Additionally, support from Monday’s interest rate cuts by Chinese banks points towards a possible boost in economic growth and energy demand.
Support from China’s Stimulus
Support for crude prices began Monday when China implemented stimulus measures after its banks lowered the benchmark lending rate by 25 basis points, more than many analysts had anticipated. This change may stimulate economic growth in China, which is the second-largest consumer of crude oil globally.
Declining Tanker Storage Boosts Prices
The worldwide drop in crude oil held on tankers is also a bullish sign for prices. According to Vortexa, the amount of crude oil stored on tankers that have remained stationary for at least seven days decreased by 5.4% week-over-week, totaling 58.8 million barrels for the week ending October 18.
Geopolitical Concerns
Concerns about escalating conflict in the Middle East, specifically Israel’s potential retaliation against Iran for its missile attack on October 1, continue to support crude prices. JPMorgan Chase noted that low global oil inventories likely mean a sustained geopolitical premium could influence crude prices until this conflict is resolved.
Weak Demand and Rising Production
Despite these supportive factors, demand for crude oil in China has exhibited a decline, presenting bearish sentiments for prices. Bloomberg’s data reveals that China’s total apparent oil demand in September dropped by 6.98% year-over-year to 14.176 million barrels per day, and for the first nine months of this year, demand decreased by 3.8% year-over-year, averaging 13.99 million barrels per day.
Adding to the bearish outlook, Libya has ramped up crude oil production following a political resolution that previously limited production and exports. On October 13, Libya’s National Oil Corporation announced an increase to 1.3 million barrels per day, marking the highest output in two months and enhancing global crude supply.
OPEC+ and Global Supply Adjustments
Support for crude prices arose after OPEC+ agreed on September 5 to pause its planned production hike of 180,000 barrels per day in October and November, responding to recent price weaknesses and fragile global energy demand. However, reports surfaced on September 26 that Saudi Arabia might abandon its unofficial $100 per barrel price target to regain market share, with plans to restore its planned crude production by December 1. OPEC’s production fell by 480,000 barrels per day in September to an eight-month low of 26.51 million barrels per day.
Impact of Russian Exports
The increase in Russian crude exports poses further bearish pressure. Weekly tracking data from Bloomberg indicated that Russian crude exports rose by 150,000 barrels per day to 3.46 million barrels per day in the week ending October 20. Meanwhile, Russia’s Energy Ministry reported that crude production in September was 8.97 million barrels per day, slightly below the target set in agreement with OPEC+.
U.S. Inventory Trends
According to last Thursday’s EIA report, U.S. crude oil inventories as of October 11 were 4.8% below the seasonal five-year average. Gasoline inventories were 3.9% lower, and distillate inventories were down by 9.8% from the five-year seasonal average. Additionally, U.S. crude oil production rose by 0.7% week-over-week to reach a record high of 13.5 million barrels per day during the week ending October 11.
Active Rig Count Updates
Last Friday, Baker Hughes reported an uptick in U.S. oil rigs, with the count increasing by one to 482 rigs. This figure remains just above the two-and-a-half-year low of 477 rigs recorded on July 19. The number of active rigs has declined over the past year, down from a four-year high of 627 rigs attained in December 2022.
More Crude Oil 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
