Oil Prices Surge Amid Economic Optimism and Supply Adjustments
On Thursday, December WTI crude oil (CLZ24) increased by +0.67, or +0.93%, while December RBOB gasoline (RBZ24) rose by +0.0182, or +0.89%.
A Recovery from Early Losses
After starting the day lower, crude oil and gasoline prices climbed to their highest levels in three weeks, finishing moderately higher. The weaker dollar helped boost crude prices, along with a record high in the S&P 500, reflecting a positive economic outlook expected to increase energy demand.
Mixed Signals from Inventory Reports
Despite the gains, crude oil prices faced some limitations due to negative signals from Wednesday’s report by the EIA, which showed unexpected increases in both crude and gasoline inventories. Speculation that President-elect Trump’s policies could boost U.S. crude production, paired with concerns that new tariffs may negatively affect China’s economy, weighed on prices.
Stronger Economic Indicators Support Energy Demand
On a positive note, global economic reports bolstered energy demand. U.S. weekly initial unemployment claims rose by +3,000 to 221,000, showing a stronger labor market than the anticipated 222,000. Similarly, China’s October exports surged +12.7% year-over-year, outpacing the expected +5.0% and marking the largest increase in over two years. In the Eurozone, retail sales rose +0.5% month-over-month, exceeding expectations of +0.4%. However, China’s crude demand has weakened, evidenced by an October drop in crude imports by -2% month-over-month and -9% year-over-year to 44.7 million metric tons, continuing a downward trend this year.
OPEC+ Production Decisions Influence Market
Crude prices received support from OPEC+’s decision to delay a planned increase in production of 180,000 barrels per day by one month, marking the second consecutive month for such a postponement. OPEC’s crude production reportedly rose +370,000 barrels per day in October, reaching 26.9 million barrels per day.
Geopolitical Tensions and Global Supply Concerns
The market reacted bullishly to bellicose remarks from Iranian supreme leader Ayatollah Ali Khamenei, who threatened a “crushing response” to Israel’s air strikes against Iran. Reports indicated Iran is preparing a counterattack on Israel, potentially escalating hostilities and disrupting crude supplies in the Middle East.
Global Tanker Stocks and Russian Export Data
A drop in global crude oil held on tankers, reported at -8.2% week-over-week to 51.44 million barrels as of November 1, was seen as bullish for prices. Additionally, Russian crude exports decreased by -530,000 barrels per day to 3.02 million barrels per day in the week ending November 3, their lowest in six weeks. Despite a slight decline in Russian crude production reported on October 23, overall output remains just below the agreed target with OPEC+
Domestic Inventories and Rig Count Trends
The EIA’s report confirmed that U.S. crude oil inventories were -4.6% below the seasonal five-year average as of November 1, while gasoline and distillate inventories remained lower than their respective averages. U.S. crude production was unchanged at a record 13.5 million barrels per day during that week. Baker Hughes noted a slight drop in active U.S. oil rigs, which fell by -1 to 479 rigs, sitting slightly above a two-and-a-half-year low from July when there were 477 rigs. This figure reflects a significant decline from the four-year high of 627 rigs documented 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 the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
