Crude Oil Prices Rise Amid Global Tension and Declining Supplies
January WTI crude oil (CLF25) today is up +0.55 (+0.78%), and January RBOB gasoline (RBF25) is up +0.0029 (+0.14%).
Geopolitical Tensions Fuel Price Increases
Crude oil and gasoline prices are trending higher today, with crude hitting a two-week peak. Global geopolitical tensions are contributing to this rise. Recently, Russia launched a hypersonic missile into the city of Dnipro, while Iran announced plans to boost its nuclear fuel production capacity in response to censure from the International Atomic Energy Agency.
Market Reactions and Economic Indicators
Support for crude oil prices also comes from a rally in the S&P 500, which reached a one-week high, signaling confidence in the economic outlook. This uptick suggests increased energy demand. However, today’s gains in crude were moderated by a rise in the dollar index (DXY00) to a two-year high.
Conflict Escalation: Ukraine and Russia
The ongoing conflict in Ukraine continues to underpin crude prices. Recently, Ukraine utilized British cruise missiles against military targets within Russia for the first time since the UK authorized such actions. Furthermore, as Ukraine conducts missile strikes on Russian border regions using U.S.-supplied weapons, President Putin has updated Russia’s nuclear doctrine, which now includes conditions for deploying nuclear weapons.
Increasing Strains with Iran
Heightened tensions concerning Iran’s nuclear activities have placed additional upward pressure on oil prices. Iran’s claim to enhance its nuclear fuel-making capability may prompt the U.S. to implement new sanctions on Iranian crude, further tightening global oil supplies.
Challenges for Refiners Amid Declining Crack Spread
Despite these bullish factors, a decrease in the crude crack spread is presenting challenges for oil prices. Today, the crack spread fell to a two-week low, discouraging refiners from purchasing crude to convert to gasoline or distillates.
Global Supply Trends: Declining Storage and Exports
On a positive note for crude prices, Vortexa reported a substantial drop in crude oil stored on tankers, indicating fewer supplies available. Specifically, storage declined by 14% week-on-week to 50.97 million barrels as of November 15.
Middle East Tensions: A Word of Warning
Concerns about escalating hostilities in the Middle East have added to the bullish sentiment. Iranian Supreme Leader Ayatollah Ali Khamenei warned of a “crushing response” to recent airstrikes by Israel, which could potentially widen existing conflicts and disrupt crude supplies in the region.
China’s Oil Demand Shows Decline
Nevertheless, waning crude demand in China is a bearish influence on oil prices. Data from Bloomberg show that China’s oil demand in October fell by 5.4% year-on-year to 14.07 million barrels per day, and the year-to-date demand has dropped by 4.03% compared to the previous year.
Russian Crude Exports Face a Decrease
On the other hand, declining Russian crude exports could support prices. Bloomberg’s tracking data reveal that exports fell by 740,000 barrels per day to a four-month low of 2.83 million barrels per day in the week ending November 17. Additionally, Russia’s Energy Ministry reported a slight decline in production, coming in at 8.97 million barrels per day in September, just below the target set with OPEC+.
Recent EIA Report Highlights U.S. Inventory Trends
In the latest EIA report from Wednesday, key findings included: (1) U.S. crude oil inventories as of November 15 were down 4.5% from the seasonal five-year average, (2) gasoline inventories fell 4.0% below this average, and (3) distillate inventories dropped 4.5% beneath the benchmark. Additionally, U.S. crude oil production declined by 0.7% to 13.4 million barrels per day for the week ending November 8, retreating from a record high of 13.5 million barrels per day the week prior.
Oil Rig Count Declines Further
Baker Hughes reported a decrease in active U.S. oil rigs, which fell by one to 478 rigs as of November 15. This count is marginally above the 477 rigs, a 2-3/4 year low recorded on July 19. Over the past two years, the number of U.S. oil rigs has significantly reduced from the 627 rigs seen 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
