Crude Oil and Gasoline Prices Rise Amid Geopolitical Tensions
Geopolitical Factors Drive Up Prices
December WTI crude oil (CLZ24) today is up +1.93 (+2.88%), and December RBOB gasoline (RBZ24) is up +0.0610 (+3.13%).
Today, crude oil and gasoline prices are showing a moderate increase. Rising geopolitical tensions are a major factor, particularly after the US allowed Ukraine to use long-range missiles inside Russia. Additionally, a weaker dollar today is making energy prices more attractive.
Heightened Tensions Impact the Market
The approval for Ukraine to use missiles has raised concerns about the US’s deeper involvement in the conflict. Furthermore, a report from Bloomberg suggests that North Korea could send up to 100,000 troops to support Russia in its war against Ukraine, intensifying the risk of broader conflict.
Support for Prices from the Crude Crack Spread
Crude prices are further supported by the strength in the crude crack spread, which has risen to a 2-3/4 month high. This increase encourages refiners to purchase more crude oil and convert it into gasoline and distillates.
Declining Tanker Storage Boosts Optimism
A recent decline in crude oil stored worldwide on tankers is seen as a positive sign for prices. Vortexa reported a 14% week-over-week drop in crude oil on vessels that had remained stationary for at least seven days, bringing the total to 50.97 million barrels for the week ending November 15.
Middle East Conflicts Add to Oil Price Pressure
Concerns about escalating tensions in the Middle East also contribute to bullish sentiment. Iranian Supreme Leader Ayatollah Ali Khamenei has warned of a severe reaction to Israeli airstrikes, and any widening conflict might disrupt crude supplies in the region.
Weak Demand in China and Increasing Russian Exports
On the downside, China’s crude demand is weakening, which negatively affects oil prices. Data from Bloomberg shows that apparent oil demand in China fell by 5.4% year-over-year in October, totaling 14.07 million barrels per day (bpd). For the first ten months of the year, demand was down 4.03% year-over-year.
Additionally, rising Russian crude exports create bearish pressure on prices. Recent vessel-tracking data showed an increase in Russian crude exports of 260,000 bpd to 3.42 million bpd for the week ending November 10. Russia’s Energy Ministry also noted a slight decrease in crude production in September, reporting 8.97 million bpd, just below its OPEC+ target.
US Supply Dynamics and Rig Count
Last Thursday’s EIA report indicated that US crude oil inventories were 4.4% below the seasonal five-year average as of November 8. Gasoline and distillate inventories also showed similar declines. US crude oil production fell by 0.7% week-over-week to 13.4 million bpd, down from the record 13.5 million bpd the previous week.
Baker Hughes reported a decrease in active US oil rigs, with the count falling by one to 478 rigs as of the week ending November 15. This number remains just above a 2-3/4 year low of 477 rigs recorded in mid-July, representing a significant decline from the 627 rigs at the high 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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
