Oil Prices Drop Amid Mixed Economic Signals
Chinese Stimulus Falls Short, Impacting Energy Demand
December WTI crude oil (CLZ24) today is down -2.14 (-2.96%), and December RBOB gasoline (RBZ24) is down -0.0459 (-2.24%).
Falling crude oil and gasoline prices are largely due to disappointing Chinese stimulus measures. Analysts expected more aggressive actions to boost consumer demand in China, but the announced measures appear insufficient to stimulate economic growth or improve energy demand. In addition, the strength of the dollar is exerting further pressure on energy prices.
Chinese Government’s Stimulus Announcements
The Chinese government revealed a 10-trillion yuan ($1.4 trillion) multi-year program aimed at refinancing local debt. This announcement did not meet analysts’ expectations for more robust measures to revive the struggling housing market and consumers’ spending in China. Given that China is the world’s second-largest consumer of crude oil, its slowing economy poses challenges for energy prices.
Positive Global Economic Indicators Offer Some Support
Conversely, today’s unexpectedly positive global economic news provided a slight boost to energy demand. The University of Michigan’s U.S. Nov consumer sentiment index rose by +2.5 to a seven-month high of 73.0, surpassing expectations of 71.0. Additionally, Japan’s September leading index CI increased by +2.5 to a four-month high of 109.4, edging out the expected 109.0. Despite this, China’s crude imports have dipped. Data shows that in October, crude imports fell -2% month-over-month and -9% year-over-year to 44.7 million metric tons. Year-to-date imports are also down -3.4% year-over-year at 457.074 million metric tons.
OPEC+ Delays Production Increase and Regional Tensions
The crude market is receiving some support from OPEC+’s decision to postpone a planned 180,000 barrels per day production increase for the second consecutive month. OPEC’s production reached 26.9 million barrels per day in October, which is an increase of +370,000 barrels per day.
Tensions in the Middle East are also influencing prices. Iranian supreme leader Ayatollah Ali Khamenei issued a warning about a “crushing response” to Israel’s recent airstrikes. Reports suggest that Iran plans to retaliate with more advanced weaponry, raising concerns that conflict in the region could disrupt crude oil supply.
Declining Crude Reserves and Russian Exports
Meanwhile, a decrease in crude oil held worldwide on stationary tankers bodes well for oil prices. Statistics from Vortexa indicate that crude oil stored on tankers that have been anchored for at least seven days dropped by -8.2% week-over-week to 51.44 million barrels as of the week ending November 1.
In a separate development, Russian crude exports also fell, with weekly vessel-tracking data from Bloomberg showing a decrease of -530,000 barrels per day to 3.02 million barrels per day, marking a six-week low. On October 23, Russia’s Energy Ministry reported that the country’s crude production in September was 8.97 million barrels per day, down -13,000 barrels per day from August and just shy of its OPEC+-agreed target of 8.98 million barrels per day.
U.S. Inventory Trends and Rig Counts Show Mixed Signals
A report from the EIA released on Wednesday highlighted that as of November 1, U.S. crude oil inventories were -4.6% below the seasonal five-year average. Gasoline inventories were -2.4% lower, and distillate inventories were -5.9% beneath their five-year seasonal average. U.S. crude oil production remained consistent at a record 13.5 million barrels per day for the week ending November 1.
According to Baker Hughes, the number of active U.S. oil rigs fell by one to 479 during the week ending November 1, slightly above the 2-1/2-year low of 477 rigs recorded on July 19. This reflects a significant decline from last year’s four-year high of 627 rigs in December 2022.
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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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
