Oil Prices Surge Amid Global Supply Concerns
Kazakhstan’s Compliance with OPEC+ Pressures Prices Higher
January WTI crude oil (CLF25) today is up +1.14 (+1.63%), and January RBOB gasoline (RBF25) is up +0.0274 (+1.41%).
Crude oil and gasoline prices are sharply increasing today, driven by expectations of tighter global oil supplies. This comes after Kazakhstan committed to adhere to OPEC+ production quotas, maintaining its production plans.
Crude prices rose after Kazakhstan announced it would comply with OPEC+ quotas and put on hold its plans to increase oil production by 190,000 barrels per day (bpd) next year.
Furthermore, the potential for new sanctions on Iranian and Russian oil exports could limit global supply, creating upward pressure on prices. Mike Walz, selected as National Security Adviser by President-elect Trump, has promised a return to “maximum pressure” on Iran, while the Biden administration is weighing new, stricter sanctions on Russian crude oil.
An observed decline in crude oil stored on tankers worldwide adds to the bullish sentiment. Vortexa reported a drop of -9.9% in crude stored on stationary tankers, falling to 65.28 million barrels in the week ending December 13.
Earlier this month, OPEC+ delayed a planned increase in its crude production of +180,000 bpd from January to April, and the United Arab Emirates (UAE) also postponed a planned increase of 300,000 bpd from January to April. OPEC+ had intended to restore 2.2 million bpd of output in monthly increments until late 2025, but that has now been pushed back to September 2026. OPEC’s November crude production climbed by +120,000 bpd to 27.02 million bpd.
Additionally, the ongoing war between Ukraine and Russia supports higher crude prices. Russia recently launched hypersonic missiles into Dnipro, and President Putin warned that strikes could target “decision-making centers” in Kyiv. Vladimir Putin has also revised Russia’s nuclear doctrine, broadening the scenarios in which nuclear weapons might be employed.
Although crude demand in China has declined, influencing oil prices negatively, it remains an important market. Bloomberg data shows China’s November oil demand decreased by -2.14% year-on-year, totaling 14.013 million bpd, while demand from January to November fell by -3.26% to an average of 13.996 million bpd.
A reduction in Russian crude exports offers a supportive factor for crude prices. Bloomberg’s weekly vessel-tracking data indicates Russian exports fell by -170,000 bpd to 2.97 million bpd for the week ending December 15.
The latest weekly EIA report presents mixed signals for crude and products. On the positive side, EIA distillate supplies unexpectedly dropped by -3.18 million barrels, contrary to expectations of a +1.1 million barrel increase. In contrast, EIA crude inventories decreased by -934,000 barrels, a smaller decline than the anticipated -1.7 million barrels, and gasoline stockpiles rose by +2.35 million barrels, exceeding expectations of a +2.0 million barrel increase. Additionally, crude supplies at Cushing, the WTI delivery point, increased by +108,000 barrels.
As of December 13, the EIA report highlighted that (1) US crude oil inventories were -5.9% below the seasonal five-year average, (2) gasoline inventories were -3.3% below the five-year average, and (3) distillate inventories were -7.0% under that average. US crude oil production fell by -0.2% in the week ending December 13, dipping to 13.604 million bpd from a peak of 13.631 million bpd in the previous week.
Baker Hughes reported last Friday that the number of active US oil rigs remained unchanged at 482 rigs for the week ending December 13. This figure is slightly above the two-and-three-quarter-year low of 477 rigs recorded last month. Over the past two years, the number of US oil rigs has decreased from a high of 627 rigs noted 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.
