Oil Markets Show Signs of Recovery Amid OPEC+ Coordination
WTI Crude and Gasoline Prices Make Gains After Recent Low
On Wednesday, December WTI crude oil (CLZ24) closed up +0.31 (+0.46%) while December RBOB gasoline (RBZ24) saw an increase of +0.0008 (+0.04%). Prices for both commodities rebounded from two-week lows, with crude experiencing short covering after Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman highlighted the need for continued cooperation within OPEC+. Their statements suggest a potential postponement of planned production cuts if oil prices remain low.
Initially, crude and gasoline prices fell to two-week lows linked to a recovery in the dollar index (DXY00), which rose to a one-year high. Additionally, unconfirmed reports indicating Iran might refrain from retaliation against Israel added to a sense of calm about the escalating tensions in the Middle East.
However, a bearish element affecting crude prices was Morgan Stanley’s decision on Wednesday to lower its full-year crude demand growth forecast for 2023. The bank revised its estimate from 950,000 bpd to 800,000 bpd and adjusted its crude price forecast for Q1 of 2025 down to $72 per barrel from a previous projection of $77.50 per barrel.
Concerns regarding global energy demand continue to weigh heavily on crude prices. OPEC announced on Tuesday that it has lowered its 2024 global oil consumption forecast to 1.8 million bpd, a drop of 107,000 bpd from last month’s forecast. This revision marks the fourth consecutive month the cartel has decreased its crude demand estimates.
In particular, crude demand from China has shown signs of weakness. According to Chinese customs data, October crude imports slid -2% month-over-month and -9% year-over-year to 44.7 million metric tons. Year-to-date, crude imports have decreased -3.4% compared to the same period last year, with China remaining the world’s second-largest crude consumer.
On the flip side, rising tensions in the Middle East could stir bullish sentiment for crude. Iranian Supreme Leader Ayatollah Ali Khamenei recently warned of a “crushing response” to Israel’s air strikes, creating fears that an escalation of hostilities could disrupt oil supplies from the region.
In a positive sign for oil prices, data from Vortexa revealed a decline in crude oil stored on tankers, which dropped -0.4% week-over-week to 61.78 million barrels as of November 8.
Conversely, increased Russian crude exports present another bearish factor. Bloomberg’s vessel-tracking data reported a rise of +260,000 bpd in Russian crude exports, reaching 3.42 million bpd for the week ending November 10. On October 23, Russia’s Energy Ministry indicated that the country’s September crude production was at 8.97 million bpd, slightly below the agreed production target of 8.98 million bpd with OPEC+.
Market analysts anticipate that EIA’s weekly report on Thursday will reveal an increase of +1.6 million barrels in crude inventories and a rise of +1.0 million barrels in gasoline supplies for the week ending November 8.
According to last Wednesday’s EIA report, as of November 1, US crude oil inventories were -4.6% below the seasonal five-year average, gasoline inventories were -2.4% lower, and distillate inventories fell -5.9% below the five-year seasonal average. Meanwhile, US crude oil production remained steady at a record 13.5 million bpd for the week ending November 1, unchanged week-over-week.
Baker Hughes reported that the number of active US oil rigs remained at 479 for the week ending November 8, just above the 2.5-year low of 477 rigs recorded in mid-July. Over the past year, the number of US oil rigs has dropped significantly from a four-year peak of 627 rigs achieved 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
