July WTI crude oil (CLN24) Friday closed down -0.92 (-1.18%), and July RBOB gasoline (RBN24) closed up +1.39 (+0.58%).
Crude oil prices Friday were undercut by demand concerns after the slightly weaker-than-expected US personal spending report. Crude oil prices were also undercut by weakness in the US stock market, which undercut the economic outlook. Crude oil prices saw carry-over weakness from Thursday's weekly EIA report, which showed an unexpected build in US oil inventories. Crude oil prices had some underlying support from Friday's weakness in the dollar.
Crude oil prices Friday were undercut after President Biden said that Israel this week offered a new cease-fire proposal to Hamas.
April US personal spending rose +0.2% m/m, down from March’s revised +0.7% (preliminary +0.8%) and slightly weaker than market expectations of +0.3%. April real personal spending fell -0.1% m/m, weaker than expectations of +0.1%.
The markets are expecting OPEC+ at its meeting on Sunday to extend their production cut of about 2 million bpd into the second half of 2024. At their last meeting on April 3, OPEC+ members left their existing production cuts of about 2 million bpd in place until the end of June. Saudi Arabia in recent days has pushed back against OPEC+ members who want to increase their production, such as UAE, Iraq, Algeria, and Kazakhstan.
Crude oil prices have underlying support from concern about the Hamas-Israel conflict. Israel's military is conducting military operations in the southern Gaza city of Rafah despite opposition from the Biden administration. There is also concern that the war might spread to Hezbollah in Lebanon or even to a direct conflict with Iran. Meanwhile, attacks on commercial shipping in the Red Sea by Iran-backed Houthi rebels have forced shippers to divert shipments around the southern tip of Africa instead of going through the Red Sea, disrupting global crude oil supplies.
Higher than expected Russian crude output is bearish for oil prices. According to Bloomberg calculations based on official data, Russian crude production in April was 9.418 million bpd, more than +300,000 bpd above the 9.1 million bpd target Russia agreed to with OPEC+. Also, Russian crude processing averaged 5.45 million bpd in the first half of May, up 4% above April's level as refineries recovered from Ukrainian drone strikes. However, Russia's fuel exports have declined as refineries are slow to come back online after being damaged by Ukrainian drone attacks. Russian fuel exports in the week to May 26 fell about -170,000 bpd from the prior week to 3.22 million bpd.
A decline in crude oil in floating storage is bullish for prices. Monday's weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -8.1% w/w to 74.82 million bbl as of May 24.
Thursday's weekly EIA report was mixed for crude and products. On the bearish side, EIA gasoline supplies unexpectedly rose +2.02 million bbl versus expectations of a -1.5 million bbl draw. Also, EIA distillate stockpiles unexpectedly rose +2.5 million bbl versus expectations of no change. On the positive side, EIA crude inventories fell -4.16 million bbl, a larger draw than expectations of -1.8 million bbl. Also, crude supplies at Cushing, the delivery point of WTI futures, fell -1.77 million bbl.
Thursday's EIA report showed that (1) US crude oil inventories as of May 24 were -4.1% below the seasonal 5-year average, (2) gasoline inventories were -0.8% below the seasonal 5-year average, and (3) distillate inventories were -5.5% below the 5-year seasonal average. US crude oil production in the week ending May 24 was unchanged w/w at 13.1 million bpd, slightly below the recent record high of 13.3 million bpd.
Baker Hughes reported Friday that active US oil rigs in the week ended May 31 fell -1 rig to 496 rigs, slightly above the 2-year low of 494 rigs posted on November 10. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted 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.