Crude Gives Up Most Gains as Weekly EIA Inventories Unexpectedly Climb

Nov WTI crude oil (CLX24) today is up +0.21 (+0.30%), and Nov RBOB gasoline (RBX24) is up +0.14 (+0.07%).

Crude oil and gasoline prices today climbed to 1-week highs and are modestly higher. Heightened Middle East tensions are supporting crude prices after Israel vowed to retaliate against Iran for its missile assault on Israel Tuesday, which could lead to a wider conflict that disrupts crude supplies from the Middle East. Crude prices fell back from their best levels after the dollar rose to a 2-1/2 week high and weekly EIA crude inventories unexpectedly increased.

Today's global economic news was bullish for energy demand and crude prices. The US Sep ADP employment change rose +143,000, showing a stronger labor market than expectations of +125,000. Also, the Japan Sep consumer confidence index rose +0.2 to a 5-month high of 36.9.

A bearish factor for crude oil was Monday's report from Bloomberg, which said Libyan oil fields halted or curtailed by an eastern government ban are expected to restore crude output this week. Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.

Crude prices were undercut by last Thursday's report from the Financial Times that said Saudi Arabia is ready to abandon its unofficial oil price target of $100 a barrel to regain its market share and is committed to returning its crude production as planned on December 1.

An increase in crude oil held worldwide on tankers is bullish for prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +1% w/w to 60.76 million bbl in the week ended September 27.

Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand.

An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +850,000 bpd to 3.74 million bpd in the week to September 29, a 3-month high. Also, Russia's Energy Ministry reported today that Russia's Sep crude production was 8.97 million bpd, down -13,000 bpd from Aug and just below the 8.98 million bpd output target it agreed to with OPEC+.

Today's weekly EIA report was bearish for crude oil and products. EIA crude inventories unexpectedly rose +3.89 million bl versus expectations of a -1.43 million bbl draw. Also, EIA gasoline supplies rose +1.1 million bbl, a larger build than expectations of +200,000 bbl. In addition, EIA distillate stockpiles fell -1.28 million bbl, a smaller draw than expectations of -2.0 million bbl. Finally, crude supplies at Cushing, the delivery point of WTI futures, rose +840,000 bbl.

Today's EIA report showed that (1) US crude oil inventories as of September 27 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were -0.8% below the seasonal 5-year average, and (3) distillate inventories were -8.3% below the 5-year seasonal average. US crude oil production in the week ending September 27 rose +0.8% w/w to 13.3 million bpd, just below the record high of 13.4 million bpd from the week of August 16.

Baker Hughes reported last Friday that active US oil rigs in the week ending September 27 fell -4 rigs to 484 rigs, modestly above the 2-1/2 year low of 477 rigs posted in the week ending July 19. The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.

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 Policyhere.