Crude Oil Prices Surge Amid Mixed Economic Signals
Crude Oil Hits 8-Week High with Geopolitical Tensions in Focus
February WTI crude oil (CLG25) today is up +0.78 (+1.10%), and February RBOB gasoline (RBG25) is up +0.0107 (+0.54%).
Today, both crude oil and gasoline prices are climbing, with crude reaching an 8-week high. This increase follows last Friday’s weekly EIA report, which revealed a significant drop in US crude inventories by -4.24 million barrels, much larger than the anticipated -600,000 barrels. Additionally, rising tensions in the Middle East, particularly after US military actions against Houthi targets in Yemen and recent Israeli strikes, have provided further support for crude oil prices. However, gains are somewhat limited as the dollar index today rose to a one-week high.
China’s Mixed Economic Data Influences Price Trends
Recent economic data from China presents a mixed bag for crude prices. On the upside, China’s December non-manufacturing PMI improved by +2.2 to 52.2, exceeding expectations of 50.2 and marking the highest growth rate in nine months. In contrast, the manufacturing PMI for the same month declined by -0.2 to 50.1, falling short of expectations.
Potential Sanctions on Iranian and Russian Crude Exports
The prospect of new sanctions targeting Iranian and Russian crude exports might tighten global oil supplies, promoting a bullish outlook for prices. Mike Walz, who has been nominated by President-elect Trump as the national security adviser, signaled a potential return to “maximum pressure” on Iran. Meanwhile, the Biden administration is contemplating stricter sanctions on Russian crude oil.
Global Crude Supply Constraints: A Positive Sign for Prices
A recent decrease in the amount of crude oil stored worldwide on tankers bodes well for oil prices. According to Vortexa, crude oil stored on tankers that had been stationary for over seven days dropped by -16% week-over-week to 60.27 million barrels as of December 27.
This upward pressure on crude prices is also supported by OPEC+’s decision, earlier this month, to delay a previously planned increase in crude production of +180,000 barrels per day (bpd) from January until April. The group also decided to unwind its output cuts at a slower pace than initially planned. Additionally, the United Arab Emirates (UAE) announced a delay in its planned 300,000 bpd production increase from January to April, which was part of a broader agreement within OPEC+ to restore 2.2 million bpd of output gradually until late 2025, now pushed back to September 2026. OPEC’s November crude production rose by +120,000 bpd to 27.02 million bpd.
China’s Demand Weakness Casts a Shadow on Future Price Growth
While global conditions seem favorable, a decline in crude oil demand from China presents a bearish element for oil prices. Data from Bloomberg indicates China’s apparent oil demand fell by -2.14% year-over-year in November to 14.013 million bpd, with a similar decline of -3.26% year-over-year in apparent oil demand from January to November, averaging 13.996 million bpd. As the world’s second-largest crude consumer, China’s performance is closely monitored.
Russian Crude Exports Decline, Offering Support for Prices
A drop in Russian crude exports has emerged as another supportive factor for crude prices. Weekly vessel-tracking data from Bloomberg showed Russian exports decreased by -170,000 bpd to 2.97 million bpd in the week ending December 15.
US Inventory Report Adds Context to Market Dynamics
The EIA report released last Friday highlighted key statistics regarding US crude oil inventories as of December 20, showing totals were -6.1% below the seasonal five-year average. Gasoline inventories were -2.8% below this average, while distillates stood at -8.2% below the average. For the week ending December 20, US crude oil production slightly fell by -0.1% week-over-week to 13.585 million bpd, just shy of the record high of 13.631 million bpd recorded during the first week of December.
Meanwhile, Baker Hughes reported that active US oil rigs remained stable at 483 rigs for the week ending December 27, slightly above the two-and-three-quarter-year low of 477 rigs noted last month. The number of active rigs has decreased significantly over the past two years, dropping from a peak of 627 rigs 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.
