Crude Oil Prices Show Signs of Recovery Amid OPEC+ Strategies
Market Reactions to Global Events and Demand Forecasts
December WTI crude oil (CLZ24) is up +0.35 (+0.51%), while December RBOB gasoline (RBZ24) has increased by +0.0006 (+0.03%).
Today, crude oil and gasoline prices have bounced back from two-week lows, driven by short covering in crude. This resurgence follows statements from Russian President Putin and Saudi Crown Prince Mohammed bin Salman, who emphasized the need for continued cooperation within OPEC+. Their remarks indicate that OPEC+ may delay any production cuts if oil prices remain low.
Initially, crude and gasoline prices dipped to two-week lows as the dollar index (DXY00) reversed early losses and surged to a 6-3/4 month high. Additionally, unconfirmed reports suggesting Iran may refrain from retaliation against Israel helped reduce fears of escalating conflict in the Middle East.
Amid these dynamics, Morgan Stanley announced a reduction in its full-year crude demand growth forecast for this year, lowering it to 800,000 bpd from a previous estimate of 950,000 bpd. Furthermore, the firm’s crude price prediction for Q1 2025 was adjusted to $72 per barrel, down from $77.50 per barrel.
Concerns over global energy demand have weighed on crude prices as OPEC recently revised its 2024 global oil consumption forecast downward by 107,000 bpd to 1.8 million bpd. This marks the fourth consecutive month of reduced demand estimates from OPEC.
China’s crude demand has also declined, negatively influencing oil prices. Data from Chinese customs indicates that crude imports in October fell by 2% month-over-month and 9% year-over-year, totaling 44.7 MMT. Year-to-date imports are down 3.4% compared to the same period last year, impacting the world’s second-largest crude consumer.
On the other hand, tensions in the Middle East can create upward pressure on crude prices. Iranian Supreme Leader Ayatollah Ali Khamenei recently warned of a “crushing response” to Israeli air strikes, raising concerns that further hostilities could escalate and disrupt oil supplies in the region.
A decrease in crude oil stored aboard tankers is another bullish factor for prices. Vortexa reported a 0.4% weekly decline in crude oil stored on inactive tankers, bringing totals down to 61.78 million barrels as of November 8.
Conversely, an increase in Russian crude exports poses a bearish influence on prices. Bloomberg’s vessel-tracking data revealed that Russian crude exports rose by 260,000 bpd to 3.42 million bpd in the week ending November 10. Additionally, Russia’s Energy Ministry reported that September’s crude production was 8.97 million bpd, a slight decrease from August, remaining just shy of the 8.98 million bpd target set with OPEC+.
Last Wednesday’s EIA report highlighted key points: (1) US crude oil inventories as of November 1 were 4.6% lower than the seasonal five-year average, (2) gasoline inventories were down 2.4%, and (3) distillate inventories were also 5.9% lower than the seasonal average. Notably, US crude oil production held steady at a record 13.5 million bpd during the week ending November 1.
Baker Hughes reported last Friday that the count of active US oil rigs remained flat at 479 for the week ending November 8, just above the 2-1/2 year low of 477 rigs recorded the week ending July 19. Over the past year, the number of US oil rigs has declined significantly from the four-year high of 627 rigs observed 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 is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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