August WTI crude oil (CLQ24) on Friday closed down -0.56 (-0.69%), and Aug RBOB gasoline (RBQ24) closed up +1.15 (+0.46%).
Crude oil and gasoline prices settled mixed on Friday, with gasoline posting a 1-month high. Crude on Friday fell back from a 7-week high and turned lower after the dollar index (DXY00) rallied to a 7-week high. Crude prices Friday initially moved higher on carryover support from Thursday's weekly EIA report that showed US crude supplies declined and gasoline demand rose to a 7-month high.
Friday's global economic news was mixed for energy demand and oil prices. On the positive side, the US Jun S&P manufacturing PMI unexpectedly rose +0.4 to 51.7, stronger than expectations of a decline to 51.0. Also, the US Jun S&P services PMI unexpectedly rose +0.3 to a 2-year high of 55.1, stronger than expectations of a decline to 54.0. On the negative side, US May leading indicators fell -0.5% m/m, weaker than expectations of -0.3% m/m. Also, the Eurozone Jun S&P manufacturing PMI unexpectedly fell -1.7 to a 6-month low of 45.6, weaker than expectations of an increase to 47.9.
Friday's report from Citigroup was bullish for crude prices as Citigroup projects a global crude deficit of about 200,000 bpd in Q3, citing geopolitical risks in the Middle East and potential weather-related disruptions.
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 -12% w/w to 78.66 million bbl as of June 14.
Crude has positive carryover from last Thursday when Russia's Energy Ministry pledged to cut daily crude production this month by 971,000 bpd from the baseline of 9.949 million bbl. In April and May, Russia over-produced relative to its OPEC+ target, but it said it plans to comply strictly with its quota beginning this month.
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 16 rose by +5% to a 2-month high of 3.7 million bpd.
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.
Thursday's EIA report showed that (1) US crude oil inventories as of June 14 were -3.6% below the seasonal 5-year average, (2) gasoline inventories were -1.5% below the seasonal 5-year average, and (3) distillate inventories were -8.2% below the 5-year seasonal average. US crude oil production in the week ending June 14 was unchanged w/w at 13.2 million bpd, just below the recent record high of 13.3 million bpd.
Baker Hughes reported Friday that active US oil rigs in the week ending June 214 fell -3 rigs to a 2-1/3 year low of 485 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.