Mixed Movements in Crude Oil and Gas Prices Amid Global Tensions
December WTI crude oil (CLZ24) is down -0.33 (-0.48%), while December RBOB gasoline (RBZ24) is up +0.0087 (+0.43%). Gasoline reached a one-week high despite crude oil experiencing a downturn.
Today’s fluctuations in crude oil and gasoline prices reveal contrasting trends; crude oil has retracted from a one-week high after news from the International Atomic Energy Agency (IAEA) indicated Iran’s decision to halt near bomb-grade uranium production. Initially, prices rose thanks to a weaker dollar and ongoing tensions from the Ukraine-Russian war.
Recent developments have put pressure on crude oil prices. The IAEA announced Iran’s agreement to stop producing uranium close to weapons-grade levels, a move that could help reduce tensions in the Middle East. Additionally, a report from Reuters noted that Hezbollah accepted a U.S. proposal for a cease-fire with Israel, further influencing market reactions.
The situation in Ukraine remains a significant factor for crude prices. Ukraine recently launched missile strikes against a border area in Russia using Western-supplied missiles. In response, Russian President Putin updated Russia’s nuclear doctrine, expanding the scenarios under which atomic weapons could be deployed, including as retaliation for conventional attacks on Russian territory.
Support for crude prices stemmed from the increase in the crude crack spread, which reached a nearly three-month high today. This increase signifies that refiners are likely to purchase more crude to convert into gasoline and distillates. Furthermore, a decline in global crude oil stored on stationary tankers adds a bullish sentiment; according to Vortexa, such storage fell by -14% week-over-week to 50.97 million barrels as of November 15.
On the horizon, heightened concerns regarding potential hostilities in the Middle East contribute more bullish pressure on crude prices. Iranian Supreme Leader Ayatollah Ali Khamenei warned of a “crushing response” to Israel’s recent airstrikes, suggesting that further escalations could disrupt oil supply from the region.
In contrast, weakening demand for crude oil in China presents a bearish outlook. Bloomberg’s data shows that China’s apparent oil demand dropped -5.4% year-over-year to 14.07 million barrels per day (bpd) in October. For the January to October period, demand declined -4.03% to 14.00 million bpd, impacting global market dynamics as China is the world’s second-largest crude consumer.
A decline in Russian crude exports adds to bullish factors for crude oil. Vessel-tracking data from Bloomberg indicates that Russian crude exports fell by -740,000 bpd to a four-month low of 2.83 million bpd in the week ending November 17. Additionally, the Russian Energy Ministry reported a decrease in crude production to 8.97 million bpd in September, just below the agreed output target of 8.98 million bpd with OPEC+.
According to last Thursday’s EIA report, U.S. crude oil inventories as of November 8 were -4.4% below the seasonal five-year average. Gasoline inventories were -4.3% below this average, while distillate inventories were -5.4% below. Additionally, U.S. crude oil production dropped -0.7% week-over-week to 13.4 million bpd, pulling back from a record 13.5 million bpd the previous week.
Baker Hughes also reported that the number of active U.S. oil rigs declined by one rig to 478 in the week ending November 15, just above the 2-3/4 year low reached in July. Over the past two years, the count of U.S. oil rigs has fallen from a 4-1/2 year high of 627 rigs, recorded 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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