Crude Oil and Gas Prices Surge to Three-Week Highs Amid Market Movements
December WTI crude oil (CLZ24) is up +1.07 (+1.50%), and December RBOB gasoline (RBZ24) has increased by +0.0379 (+1.89%).
Market Momentum: Economic News and OPEC Decisions Fuel Price Increases
Crude oil and gasoline prices have extended Monday’s rally, reaching highs not seen in three weeks. Today’s drop in the dollar index (DXY00) to a two-week low supports higher energy prices. Additionally, over the weekend, OPEC+ announced it would postpone its planned December production increase by one month, providing further support for crude. Concerns over escalating tensions in the Middle East, specifically regarding Iran’s potential counterattack on Israel, are also contributing to the rise in prices.
Strong Economic Indicators Boost Demand Outlook
Better-than-expected economic data from both the US and China, the world’s top two crude consumers, have fueled optimism for oil prices. The US October ISM services index unexpectedly climbed +1.1 to 56.0, marking the most robust expansion in over two years. In China, the October Caixin services PMI increased by +1.7 to 52.0, outpacing preliminary estimates of 50.5.
OPEC+ Continues to Control Supply
Support for crude prices also stems from OPEC+’s decision on Sunday to delay its 180,000 bpd production increase for the second month in a row. In October, OPEC’s crude production rose by +370,000 bpd to a total of 26.9 million bpd.
Escalating Tensions in the Middle East Heighten Market Concerns
Comments from Iranian leaders have further impacted crude prices. Iranian Supreme Leader Ayatollah Ali Khamenei threatened a “crushing response” to Israel’s recent air strikes. A recent report suggested Iran is planning more aggressive countermeasures against Israel, which could escalate the conflict and disrupt crude supply from the region.
Crack Spread and Inventory Trends Support Price Stability
The rise in the crude crack spread to a three-week high is encouraging refiners to purchase and process more crude into gasoline and distillates. Moreover, a decline in the volume of crude oil held in tankers is positive for oil prices, with Vortexa reporting an -8.2% week-over-week drop to 51.44 million barrels as of November 1.
Mixed Signals from Chinese Demand and Russian Exports
On the downside, weaker crude demand in China presents a bearish outlook. Data from Bloomberg shows that China’s total oil demand in September fell by -6.98% year-on-year to 14.176 million bpd. Additionally, Russian crude exports rose by +120,000 bpd to 3.54 million bpd in late October, adding pressure to prices.
US Production and Inventory Reports Indicate Resilience
The EIA report from last Wednesday highlighted various aspects of US oil resources: crude oil inventories were -4.2% below the five-year seasonal average as of October 25, gasoline inventories were -3.5% lower, and distillate inventories fell by -8.8%. Concurrently, US crude oil production stalled week-over-week at a record 13.5 million bpd.
Declining US Oil Rig Count Suggests Future Constraints on Production
As of November 1, Baker Hughes reported a slight decline in active US oil rigs, down by -1 to 479 rigs, marginally above a 2.5-year low. The number of rigs has decreased from a four-year high of 627 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 is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
