Crude Oil and Gasoline Prices Surge Amid Global Tensions
December WTI crude oil (CLZ24) closed up +0.23 (+0.33%) on Tuesday, while December RBOB gasoline (RBZ24) gained +0.0194 (+0.96%).
Prices Reach Weekly Highs on Market Support
On Tuesday, crude oil and gasoline prices both climbed to their highest levels in a week, driven by a weaker dollar and rising tensions from the Ukraine-Russian conflict. However, prices dipped after the International Atomic Energy Agency (IAEA) reported that Iran will halt production of near bomb-grade uranium.
Market Reactions to Global Events
The intensifying conflict in Ukraine added upward pressure on crude prices as Ukraine carried out missile strikes on Russia’s border using Western-supplied missiles. In response, Russian President Putin approved a new nuclear policy that broadens the circumstances under which Russia might utilize nuclear weapons.
Additionally, the increase in the crude crack spread, which rose to a nearly three-month high, is encouraging refiners to purchase more crude oil and convert it into gasoline and distillates.
Iran and Middle East Tensions Impact Prices
Crude prices faced some downward pressure after the IAEA’s update on Iran, which indicated a potential easing of tensions in the Middle East. Additionally, reports from Reuters suggested that Hezbollah accepted a U.S. cease-fire proposal with Israel.
However, a decline in crude oil stored on tankers is considered supportive for oil prices. According to Vortexa, crude oil on stationary tankers dropped by -14% week-over-week to 50.97 million barrels for the week ending November 15.
China’s Demand Falls, Affecting Global Prices
Weakening crude demand in China remains a concern for oil prices. Bloomberg’s data shows that China’s oil demand decreased by -5.4% year-over-year to 14.07 million barrels per day (bpd) in October. From January to October, the demand was also down -4.03% year-over-year, averaging 14.00 million bpd. As the world’s second-largest crude consumer, China’s decline sharply affects market dynamics.
Russia’s Export Cuts Provide Price Support
On a positive note for crude prices, Russian exports have also seen a decline. Weekly vessel-tracking data from Bloomberg indicated that Russian crude exports dropped by -740,000 bpd, reaching a four-month low of 2.83 million bpd for the week ending November 17. Additionally, Russia’s Energy Ministry reported that September crude production was 8.97 million bpd, down -13,000 bpd from August and just shy of the 8.98 million bpd target set with OPEC+.
Looking Ahead: EIA Report Predictions
The market anticipates a decrease in U.S. crude inventories by -85,000 barrels, while gasoline supplies are expected to rise by +750,000 barrels in the upcoming EIA report.
Last week’s EIA report highlighted that U.S. crude oil inventories were -4.4% below the five-year seasonal average as of November 8. Gasoline and distillate inventories also reported declines, at -4.3% and -5.4% below seasonal averages, respectively. For the week ending November 8, U.S. crude oil production fell by -0.7% from the previous week to 13.4 million bpd, retreating from the record of 13.5 million bpd noted earlier.
Meanwhile, Baker Hughes stated that the number of active U.S. oil rigs decreased by one to 478 as of November 15, remaining just above a nearly three-year low of 477 rigs recorded on July 19. The count of oil rigs has significantly dropped from the recent peak 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.
