Crude Oil and Gasoline Prices Tumble Amid Weaker Demand and Economic Outlook
January WTI crude oil (CLF25) today is down -1.16 (-1.64%), and January RBOB gasoline (RBF25) is down -0.0366 (-1.85%).
Pressure Mounts from China’s Decreased Energy Demand
Today’s trading sees both crude oil and gasoline prices drop, with gasoline hitting a one-week low. The decline is mainly attributed to easing energy demand in China, the world’s second-largest crude consumer. This has raised concerns about the impact on global crude prices. Bloomberg reports that China’s apparent oil demand decreased -2.14% year-over-year in November, totaling 14.013 million barrels per day (bpd). From January to November, the drop was -3.26% year-over-year at 13.996 million bpd.
Weak Crack Spread Discourages Refiners
The weakening crude crack spread is also negatively affecting oil prices. Today, the crack spread fell to its lowest point in a week and a half, making refiners hesitant to buy crude oil for processing into gasoline and distillates.
Geopolitical Developments May Affect Oil Supply
On the geopolitical front, potential new sanctions on Iranian and Russian crude exports could restrict oil supply, which might push prices higher. Mike Walz, the President-elect’s national security adviser, has indicated a desire to reinstate rigorous pressure on Iran. Meanwhile, the Biden administration is considering stricter sanctions against Russian oil.
Global Storage Levels Decline, Supporting Prices
Encouragingly, the global crude oil being held on tankers has declined, which could support pricing. According to Vortexa, crude oil stored on stationary tankers fell -9.9% week-over-week to 65.28 million barrels for the week ending December 13.
OPEC+ Adjusts Production Plans Amidst Market Conditions
Earlier in the month, support for crude prices was bolstered as OPEC+ extended its planned production increases. The expected rise of +180,000 bpd, initially slated for January, has now been pushed to April, along with a slower pace for unwinding output cuts. The UAE has also postponed its planned 300,000 bpd increase to April, stalling previously agreed plans to restore 2.2 million bpd of output by late 2025 until September 2026. For context, OPEC crude production rose by +120,000 bpd in November, totaling 27.02 million bpd.
Ukraine-Russian Conflict Continues to Influence Market Sentiment
The ongoing Ukraine-Russian conflict continues to create market volatility for crude prices. Following the launch of a new hypersonic missile by Russia into Dnipro, tensions escalated and further stirred uncertainty about energy supplies. Russian President Putin’s warnings about targeting decision-making centers in Kyiv have further complicated the situation.
US Crude Oil Inventory Trends Show Potential Supply Tightness
According to the EIA report released last Wednesday, U.S. crude oil inventories as of December 6 were -6.2% below the seasonal five-year average, with gasoline inventories -3.6% and distillate inventories -4.5% below their respective averages. Furthermore, U.S. crude oil production in the week ending December 6 increased +0.9% week-over-week to a record 13.631 million bpd.
Oil Rig Counts Remain Steady Amidst Market Fluctuations
Baker Hughes reported last Friday that the number of active U.S. oil rigs remained unchanged at 482 for the week ending December 13. This figure is slightly above the recent low of 477 rigs recorded last month. Over the past two years, the number of U.S. oil rigs has dropped from a four-and-a-half-year peak of 627 rigs 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.
