Crude Oil and Gas Prices Decline Amid Jobless Claims Spike
February WTI crude oil (CLG25) closed down -0.48 (-0.68%) on Thursday, while February RBOB gasoline (RBG25) fell -0.0119 (-0.60%).
Market Reactions to Economic Reports
Crude oil and gasoline prices declined on Thursday after an initial rise, influenced by a report showing US jobless claims reached a three-year high. This news raised concerns about the strength of the US labor market.
Early Gains Supported by Weaker Dollar
Earlier in the day, crude prices moved upwards, supported by a weaker dollar and a Tuesday report indicating a drop of -3.2 million barrels in US crude stockpiles. However, the weekly EIA crude inventory report, usually disclosed on Wednesdays, is postponed this week to Friday due to the Christmas holiday. Additionally, reports suggested that China might sell a significant amount of special Treasury bonds to stimulate its economy, which also fueled short-term optimism in the market.
Political Climate Influences Prices
Global political uncertainty weighed on oil prices. Recently, President-Elect Trump threatened to take control of the Panama Canal if transit rates weren’t reduced, amidst a series of discussions about tariffs and increased sanctions.
Potential Sanctions on Crude Exports
Prospects of new sanctions targeting Iranian and Russian crude exports may constrict global oil supplies. Mike Walz, who has been designated as Trump’s national security adviser, expressed intentions to reinstate “maximum pressure” on Iran, while the Biden administration is contemplating more stringent sanctions on Russian crude oil.
Tankers Holding Oil and OPEC+ Decisions
Despite the aforementioned support factors, a rise in crude oil stored on tankers is bearish for world prices. Vortexa’s data revealed that the volume of stationary crude oil increased by +7% week-on-week, reaching 70.20 million barrels as of December 20.
In early December, OPEC+ decided to delay a planned production increase of +180,000 barrels per day (bpd) from January to April. This decision was accompanied by the UAE’s announcement to postpone a similar increase of 300,000 bpd until April. Previously, OPEC+ had agreed to gradually restore 2.2 million bpd of output from now until late 2025, but this timeline has been extended until September 2026. OPEC’s November crude production rose by +120,000 bpd to 27.02 million bpd.
Impact of Ongoing Conflicts
The ongoing Ukraine-Russian conflict also supports crude prices. In recent developments, Russia launched a hypersonic missile into Dnipro, while Ukraine has increased its use of Western long-range missiles. The situation escalated when Russian President Putin warned of potential strikes on decision-making centers in Kyiv and approved a new nuclear doctrine, widening the criteria for nuclear weapon use.
Weakening Demand from China
Bearish trends are reflected in China’s crude oil demand, which has seen a decline. Bloomberg’s data indicates a decrease of -2.14% year-on-year in November demand, dropping to 14.013 million bpd. From January to November, demand fell by -3.26% year-on-year to 13.996 million bpd, as China remains the second-largest crude consumer globally.
Declining Russian Exports
Conversely, a reduction in Russian crude exports is seen as supportive for prices. Weekly tracking data from Bloomberg showed that Russian crude exports decreased by -170,000 bpd to 2.97 million bpd as of December 15.
Expectations for EIA Report
Looking ahead, analysts forecast a drop in Friday’s weekly EIA crude inventories by -600,000 barrels, with gasoline supplies also predicted to decline by -500,000 barrels. The latest EIA report from December 13 indicated that US crude oil inventories were -5.9% below the seasonal five-year average, gasoline inventories were -3.3% lower, and distillate inventories were -7.0% below the average. Additionally, US crude oil production fell by -0.2% week-on-week to 13.604 million bpd, down slightly from the previous week’s record of 13.631 million bpd.
Oil Rig Count Update
Baker Hughes reported that active US oil rigs increased by one to a total of 483 rigs as of December 20. This figure is modestly above the 2-3/4 year low of 477 rigs recorded last month, but has declined from a high of 627 rigs in December 2022.
On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information presented is for informational purposes only. For more details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
