December WTI crude oil (CLZ25) is up +0.23 (+0.37%), and December RBOB gasoline (RBZ25) is up +0.0058 (+0.31%).
Crude oil prices are trading higher today on economic optimism after news of a preliminary US-China trade agreement. Also, crude oil prices saw support after Ukrainian President Zelensky said Ukraine will expand its military strikes on refineries deep inside Russia.
Oil prices were undercut today by a Vortexa report showing that crude oil stored on tankers that have been stationary for at least 7 days rose by +12% w/w to 89.75 million bbls in the week ended Oct 24.
Crude oil prices have continued support from last week's news of increased US and EU sanctions on Russian energy and energy infrastructure. The Trump administration last Wednesday announced sanctions on Rosneft PJSC and Lukoil PJSC, Russia's biggest oil producers, due to "Russia's lack of serious commitment to a peace process to end the war in Ukraine." Meanwhile, the EU adopted a transaction ban on Rosneft and Gazprom Nef and sanctioned 117 additional shadow-fleet vessels and 45 entities that have helped Russia evade sanctions, including 12 companies in China and Hong Kong.
Concerns about a global supply glut are a major bearish factor for crude prices. The IEA recently forecasted a record global oil surplus of 4.0 million bpd for 2026.
Crude prices found support after OPEC+ on October 5 agreed to a 137,000 bpd increase in its crude production target, starting in November, which was below market expectations of a potential 500,000 bpd boost. OPEC+ is in the midst of boosting output by a further 1.66 million bpd to fully reverse the 2.2 million bpd production cut seen in early 2024. OPEC's September crude production rose by +400,000 bpd to 29.05 million bpd, the highest in 2.5 years.
Reduced crude exports from Russia are supportive of oil prices. Ukraine has targeted at least 28 Russian refineries over the past two months, exacerbating a fuel crunch in Russia and limiting Russia's crude export capabilities. Ukrainian drone and missile attacks on Russian refineries and oil export terminals curbed Russia's total seaborne fuel shipments to 1.88 million bpd in the first ten days of October, the lowest average in over 3.25 years.
The outlook for higher crude production in Iraq is expected to boost global oil supplies, which is bearish for crude prices. Iraq recently announced that it had reached an agreement with the regional government of Kurdistan to resume oil exports from the Kurdish region via a pipeline to Turkey, which had been halted for the past two years due to a payment dispute. Iraqi Foreign Minister Hussein said that the resumption of crude exports could add 500,000 bpd of fresh oil supplies to global markets.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of October 17 were -4.0% below the seasonal 5-year average, (2) gasoline inventories were -0.6% below the seasonal 5-year average, and (3) distillate inventories were -6.6% below the 5-year seasonal average. US crude oil production in the week ending October 17 fell -0.1% w/w to 13.629 million bpd, falling back from a record high of 13.636 million bpd on the week of October 10.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ending October 24 rose by +2 rigs to 420 rigs, modestly above the 4-year low of 410 rigs from August 1. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported 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 Policy here.
