Oil Prices Dip as Dollar Strengthens and Inventories Rise
December WTI crude oil (CLZ24) closed down -0.30 (-0.42%) on Wednesday, while December RBOB gasoline (RBZ24) saw a decrease of -0.0092 (-0.45%).
Market Pressures Impact Oil and Gasoline Prices
Both crude oil and gasoline prices fell moderately on Wednesday. The crude market faced pressure from a stronger US dollar, with the dollar index (DXY00) reaching a 4-month high. Additionally, the weekly EIA report showed an unexpected rise in crude and gasoline inventories, adding to the bearish sentiment. Despite this, crude prices recovered from their lows after the S&P 500 hit a record high, suggesting optimism around President-elect Trump’s policies potentially boosting economic growth and energy demand.
OPEC+ and Global Crude Production Updates
Support for crude prices stemmed from OPEC+ announcing a month-long delay in its planned 180,000 barrels per day (bpd) production increase. This is the second consecutive month in which the increase has been postponed. In October, OPEC’s crude production rose by +370,000 bpd, totaling 26.9 million bpd.
Geopolitical Tensions Affect Market Sentiment
Bellicose comments from Iranian leadership added a layer of bullish sentiment. On Monday, Supreme Leader Ayatollah Ali Khamenei warned of a “crushing response” to Israel’s recent air strikes. A Wall Street Journal report indicated that Iran plans to retaliate with more advanced weaponry. The potential escalation between Iran and Israel raises concerns for crude supply disruptions in the already volatile Middle East.
Global Supply and Demand Dynamics
A decrease in crude oil held on tankers supports higher oil prices. Vortexa reported a -8.2% week-over-week decline in oil stored on stationary tankers, totaling 51.44 million barrels by November 1.
However, weakening demand in China poses a downside risk. Bloomberg’s data noted a -6.98% year-on-year drop in China’s apparent oil demand in September, bringing the total for 2023 down -3.8% from the previous year.
On a more positive note, a drop in Russian crude exports could help the market. Vessel-tracking data from Bloomberg revealed a decline of -530,000 bpd in Russian crude exports, hitting a 6-week low of 3.02 million bpd as of November 3. Meanwhile, Russia’s Energy Ministry reported September crude production at 8.97 million bpd, slightly below their agreed output with OPEC+.
Weekly EIA Report Highlights
This week’s EIA report contained several bearish indicators for crude and its products. U.S. crude inventories unexpectedly rose by +2.15 million barrels, contradicting projections for a -90,000 barrel drop. Additionally, gasoline supplies increased by +412,000 barrels against expectations for a decrease, and distillate stockpiles rose by +2.9 million barrels instead of drawing down as expected. Notably, crude stocks at Cushing, the delivery point for WTI futures, increased by +522,000 barrels.
Additionally, the EIA reported that as of November 1, U.S. crude oil inventories stood -4.6% below the seasonal 5-year average, while gasoline and distillate inventories were -2.4% and -5.9% below their respective averages. U.S. crude oil production remained steady at a record 13.5 million bpd for the week ending November 1.
Rig Count Shows a Decrease
Baker Hughes reported a drop of -1 in active U.S. oil rigs for the week ending November 1, bringing the total down to 479, just above a 2.5-year low of 477 rigs recorded in mid-July. The count has significantly decreased over the past year, down from a 4-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 is solely for informational purposes. For more information, please view the Barchart Disclosure Policy
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
