Crude Oil Prices Experience Moderate Decline Amid Global Economic Concerns
November WTI crude oil (CLX24) closed down -1.73 (-2.29%) on Monday, while November RBOB gasoline (RBX24) fell by -4.30 (-2.00%).
Dollar Strength and Chinese Demand Weigh on Energy Prices
Crude oil and gasoline prices posted moderate losses on Monday, primarily due to a rally in the dollar index (DXY00), which reached a two-month high, negatively impacting energy prices. Additionally, concerns related to Chinese energy demand surfaced after the country’s Finance Ministry provided no new details on additional stimulus measures over the weekend. However, losses in crude oil were tempered as the S&P 500 hit a new record high, indicating strong confidence in the economic landscape that typically supports energy demand. The ongoing tensions in the Middle East also kept some upward pressure on crude prices, as fears of potential escalations could disrupt supply from the region.
China’s Trade Data Signals Global Economic Weakness
Recent trade reports from China added to concerns regarding global growth and energy demand. In September, Chinese exports only rose by +2.4% year-over-year, falling short of the expected +6.0% increase. Similarly, imports advanced by +0.3% year-over-year, below the anticipated +0.8% increase.
Geopolitical Factors Boost Crude Prices Potentially
Crude prices may find some support amidst fears of an Israeli retaliation against Iran, following a missile strike on Israel on October 1. Goldman Sachs predicts that Brent crude could rise to $90 per barrel if Iranian oil exports are interrupted. Furthermore, JPMorgan Chase indicates that low global oil inventories suggest a sustained geopolitical premium in crude prices may persist until the conflict between Israel and Iran sees resolution.
Rising Global Oil Stocks Add Bearish Pressure
The amount of crude oil stored on tankers is increasing, which generally puts downward pressure on prices. Vortexa reported a 24% week-on-week increase in crude oil held on stationary tankers, rising to 58.58 million barrels for the week ending October 11.
Libya’s Rising Production Impacts Global Supply
In Libya, a political resolution has led to increased crude production, which is another bearish factor for global oil prices. The National Oil Corporation announced production has reached 1.13 million barrels per day (bpd), marking the highest output in two months and boosting overall global supplies.
OPEC+ Takes Precautionary Measures
OPEC+ decided earlier this month to halt a planned production increase of 180,000 bpd for October and November, responding to recent weaknesses in crude prices and fragile global energy demand signs. However, reports suggest Saudi Arabia may be prepared to abandon its $100 per barrel price target to regain market share and is committed to continuing its planned production ramp-up by December 1.
Russian Exports Decline Provide Price Support
A decline in Russian crude exports has added some bullish support for prices. According to Bloomberg’s vessel-tracking data, Russian crude exports decreased by 370,000 bpd to 3.37 million bpd during the week ending October 6. Meanwhile, Russia’s Energy Ministry noted that September crude production fell slightly to 8.97 million bpd, marginally below its production target with OPEC+.
U.S. Oil Inventories Present a Mixed Picture
In the latest EIA report, key insights into U.S. oil inventories revealed that as of October 4, crude oil inventories were 4.0% below the seasonal five-year average, gasoline inventories were down 3.7%, and distillate inventories were down 9.0%. U.S. crude oil production for the week ending October 4 rose by 0.8% to reach 13.4 million bpd, tying its previous record set in mid-August.
Rig Counts Indicate Future Production Trends
According to Baker Hughes, the number of active U.S. oil rigs increased by two to 481 rigs as of October 11, just slightly above a two-and-a-half-year low of 477 rigs recorded in July. Over the past year, rig counts have dropped significantly from a four-year high of 627 rigs in December 2022.
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On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information and data provided herein are for informational purposes only. Please review the Barchart Disclosure Policy here.
The views and opinions expressed here are those of the author and do not necessarily reflect those of Nasdaq, Inc.
