Crude Oil and Gasoline Prices Surge to Multi-Month Highs Amid Economic Optimism
Economic Indicators Boost Energy Demand
February WTI crude oil (CLG25) finished Thursday up +1.41 (+1.97%), while February RBOB gasoline (RBG25) increased by +0.0427 (+2.13%). Prices climbed as crude hit a 2-1/2 month high and gasoline reached a 6-week peak. Reports of a robust US economy, highlighted by weekly jobless claims falling to an 8-month low and a positive revision in the December S&P manufacturing PMI, helped support demand for energy.
Job Market Data Fuels Price Growth
Reports released Friday indicated better-than-expected job statistics. Initial unemployment claims unexpectedly decreased by 9,000 to reach 211,000, demonstrating a stronger labor market than the projected increase to 221,000. Additionally, the December S&P manufacturing PMI was revised upward by +1.1 to 49.4, surpassing the previous estimate of 48.3.
Refiner Interest Increases Crude Purchases
The crude crack spread encouraged refiners to purchase more crude oil, surging to a 5-week high. This positive movement indicates growing opportunities for turning crude into gasoline and other distillates.
Jet Fuel Demand Surges
Another boost for crude prices comes from strong demand for jet fuel. Data from the EIA highlighted that US jet fuel demand rose by +1.9% year-on-year in October, reaching 1.73 million barrels per day—the highest monthly level in seven years.
Sanctions Loom to Tighten Oil Supply
Potential new sanctions against Iranian and Russian crude exports could further tighten global oil supplies, driving prices higher. Mike Walz, President-elect Trump’s choice for national security adviser, has voiced plans for renewed “maximum pressure” on Iran. Meanwhile, the Biden administration is contemplating more stringent sanctions on Russian oil.
Global Oil Supply Signals Favor Price Increases
A decrease in crude oil stored worldwide on tankers strengthens the bullish outlook for oil prices. Vortexa reported a significant -16% week-over-week reduction in crude stored on stationary tankers as of December 27, bringing the total to 60.27 million barrels.
OPEC+ Adjusts Production Plans
Crude prices found additional support as OPEC+ delayed a planned production increase of +180,000 barrels per day from January to April. They also decided to taper production cuts at a slower rate than initially planned. The UAE announced a similar delay regarding its target increase of 300,000 barrels per day.
China’s Demand and Russian Exports Present Mixed Signals
In contrast, weakened crude demand in China poses a bearish factor for oil prices. Data by Bloomberg noted a -2.14% year-on-year decrease in apparent oil demand for November, totaling 14.013 million barrels per day. Furthermore, Russian crude exports dropped by -170,000 barrels per day to 2.97 million barrels in mid-December, showing mixed signals in the market.
EIA Inventory Reports Reveal Pressure on Prices
The latest weekly EIA report was largely bearish. While crude inventories declined by -1.18 million barrels, this decrease was less than the anticipated -2.5 million barrels. Gasoline supplies rose significantly by +7.2 million barrels while distillate stockpiles unexpectedly increased by +6.41 million barrels. However, on a brighter note, crude stockpiles at Cushing, the delivery point for WTI futures, fell by -142,000 barrels to a 14-month low.
US Oil Production Holds Steady
As of December 27, US crude oil inventories were reported as -5.3% below the seasonal 5-year average, with gasoline and distillate inventories also trailing seasonal norms. US production dipped slightly by -0.1% week-over-week to 13.573 million barrels per day, just shy of its recent record high of 13.631 million barrels per day.
Rig Count Remains Flat
Baker Hughes reported that the number of active US oil rigs remained unchanged at 483 for the week ending December 27, marking a modest rise from the 2-3/4 year low of 477 rigs last month. There has been a significant decline in rig counts since peaking at 627 rigs in December 2022.
On the date of publication, Rich Asplund did not hold any positions in the mentioned securities. All data in this article is for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
