Crude Oil Markets Decline Amid Global Trends and US Strategic Moves
WTI Crude Oil and Gasoline Prices Experience Setbacks
December WTI crude oil (CLZ24) on Tuesday closed down -0.17 (-0.25%), and December RBOB gasoline (RBZ24) closed down -0.0078 (-0.41%).
Insights into Recent Price Movements
On Tuesday, crude oil prices continued the decline that began on Monday, which saw a significant drop of -6.13%. This plunge was influenced by Israel’s limited retaliatory strike over the weekend, increasing hopes that direct conflicts with Iran might have subsided. Iran announced on Monday that its oil industry was unaffected by Israel’s actions, which did not affect Iranian oil infrastructure.
Political Factors Affecting Oil Prices
Concerns around oil prices eased further when Israel expressed openness to a temporary truce in Gaza in exchange for a few hostages. In addition, the US Energy Department has plans to add 3 million barrels to the Strategic Petroleum Reserve, providing further support for oil prices.
Global Supply and Demand Dynamics
A decline in the amount of crude oil stored on tankers is a bullish signal for the market. Vortexa reported on Monday that crude oil storage on stationary tankers fell by -18% week-over-week to 55.49 million barrels as of October 25. However, weak demand from China puts downward pressure on oil prices. Bloomberg data indicates that China’s total apparent oil demand in September decreased by -6.98% year-on-year to 14.176 million barrels per day (bpd), with demand for the year showing a -3.8% annual decline to 13.99 million bpd.
Libya’s Production and OPEC+ Influence
In another bearish signal for crude, Libya has ramped up oil production following the resolution of a political standoff. The National Oil Corporation in Libya stated that production increased to 1.3 million bpd, the highest level in two months, enhancing global supply.
OPEC+ agreed on September 5 to pause any planned increase in crude production due to recent price drops and unstable global demand. Despite this, the Financial Times noted on September 26 that Saudi Arabia may no longer focus on a $100 per barrel price target to reclaim market share, planning to resume its original production levels by December 1. OPEC crude production fell by -480,000 bpd to an eight-month low of 26.51 million bpd in September.
Russian Exports and US Inventory Trends
Additionally, increasing Russian crude exports contribute to the bearish outlook. Bloomberg’s tracking data revealed that Russian crude exports rose by +150,000 bpd to 3.46 million bpd in the week ending October 20. However, Russia’s Energy Ministry noted that September’s production was 8.97 million bpd, slightly below its agreed target with OPEC+.
US Rig Count and Inventory Levels
The latest EIA report indicated that as of October 18, US crude oil inventories were -3.6% below the five-year seasonal average. Gasoline inventories were down by -2.9%, and distillate inventories by -9.0%. US crude oil production remained steady at a record 13.5 million bpd during the same week.
Baker Hughes reported a decrease in active US oil rigs, which fell by -2 to 480 rigs for the week ending October 25. This count is just above the 2.5-year low of 477 rigs recorded in July. Overall, the number of active rigs has decreased from a four-year high of 627 rigs in December 2022.
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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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
