July WTI crude oil (CLN24) on Wednesday closed up +0.60 (+0.77%), and July RBOB gasoline (RBN24) closed down -1.45 (-0.39%).
Crude oil and gasoline prices settled mixed on Wednesday. Crude and gasoline Wednesday initially rose to 1-1/2 week highs on economic optimism after the S&P 500 rallied to a new record high on favorable US inflation news. Also, the weakness in the dollar on Wednesday was supportive of energy prices. However, crude fell back from its best levels, and gasoline dropped into negative territory after weekly EIA crude inventories unexpectedly increased.
Crude prices also have carryover support from last Thursday when Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said OPEC+ could pause or reverse its decision to boost crude production if prices falter.
Higher than expected Russian crude output and exports are bearish for oil prices. Russian crude production averaged 9.39 million bpd in May, which was +3.8% above its agreed target of 9.049 million bpd. Russia's fuel exports have also increased as refineries come back online after being damaged by Ukrainian drone attacks. Russian fuel exports in the week to June 9 rose +10% to 3.53 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 -19% w/w to 75.59 million bbl as of June 7.
OPEC+ rolled out a plan to restore some crude production in Q4, which sparked worries about a glut in global oil supplies. OPEC+ agreed on June 2 to extend the 2 million bpd of voluntary crude production cuts into Q3 but then gradually phase out the cuts over the following 12 months beginning in October. OPEC pledged to extend its crude production cap at about 39 million bpd to the end of 2025. Also, the UAE was given a 300,000 bpd boost to its production target for 2025.
An increase in OPEC crude output is negative for oil prices. OPEC May crude production rose +60,000 bpd to 26.96 million bpd, a 5-month high.
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.
Wednesday's weekly EIA report was mixed for crude and products. On the bullish side, EIA distillate stockpiles rose +881,000 bbl, below expectations of +2.1 million bbl. Also, crude supplies at Cushing, the delivery hub for WTI futures, fell -1.59 million bbl. On the negative side, EIA crude inventories unexpectedly rose +3.73 million bbl versus expectations of a -1.5 million bbl draw. Also, EIA gasoline supplies rose +2.56 million bbl, a larger build than expectations of +1.5 million bbl.
Wednesday's EIA report showed that (1) US crude oil inventories as of June 7 were -3.6% below the seasonal 5-year average, (2) gasoline inventories were -0.5% below the seasonal 5-year average, and (3) distillate inventories were -7.2% below the 5-year seasonal average. US crude oil production in the week ending June 7 rose +0.8% w/w at 13.2 million bpd, just below the recent record high of 13.3 million bpd.
Baker Hughes reported last Friday that active US oil rigs in the week ended June 7 fell -4 rigs to a 2-1/4 year low of 492 rigs. 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.