August WTI crude oil (CLQ23) is up +0.64 (+0.92%), and Aug RBOB gasoline (RBQ23) is up +0.0116 (+0.46%).
Crude oil prices are seeing support from today's rally in stocks, which supports the outlook for the economy and energy demand. Crude oil is getting a boost today from the -0.4% sell-off in the dollar index. Crude oil is also seeing some continued support from Wednesday's unexpected -9.6 million bbl decline in EIA weekly crude oil inventories.
In a supportive factor for oil prices, the market consensus is that Saudi Arabia will extend its unilateral 1 million bpd production cut into August. Saudi Oil Minister Prince Abdulaziz bin Salman might announce that intention next week when he addresses an oil conference in Vienna hosted by OPEC.
Oil prices continue to be undercut by concern about weaker Chinese energy demand. China's National Petroleum Corp (CNPC), China's largest oil and gas producer, cut its 2023 China crude oil demand forecast on June 20 to +3.5% to 740 MMT from a March forecast of +5.1% to 756 MMT. In another sign of weak Chinese oil demand, analytics firm Kpler recently reported that China's crude oil stockpiles rose to a 2-year high in May of 966 million bbl, well above the five-year average of 858 million bbl.
Crude prices jumped after OPEC+ on June 4 agreed to maintain its crude production levels. However, Saudi Arabia said it would voluntarily cut its crude output by 1 million bpd starting in July, and Saudi Energy Minister Price Abdulaziz bin Salman said he "will do whatever is necessary to bring stability to the oil market." He also said that July's additional cuts could be extended, but they will keep the market "in suspense" about whether this will happen. The market consensus is that the Saudi cuts will be extended into August. OPEC May crude production fell -500,00 bpd to a 16-month low of 28.26 million bpd.
Thursday's EIA report showed that (1) U.S. crude oil inventories as of June 23 were -1.4% below the seasonal 5-year average, (2) gasoline inventories were -6.8% below the seasonal 5-year average, and (3) distillate inventories were -14.4% below the 5-year seasonal average. U.S. crude oil production in the week ended June 23 was unchanged at 12.2 million bpd, just mildly below the 3-year high of 12.4 million bpd posted in the week ended June 9. U.S. crude oil production is well below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended June 23 fell by -6 rigs to a 1-1/4 year low of 546 rigs. That is well below the 3-1/4 year high of 627 rigs posted on December 2, 2022. U.S. active oil rigs have more than tripled from the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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.
