October WTI crude oil (CLV25) today is down -0.55 (-0.85%), and October RBOB gasoline (RBV25) is down -0.0184 (-0.92%).
Crude oil and gasoline prices are under pressure today as a slide in stocks has prompted a risk-off sentiment in asset markets. Also, today's weaker-than-expected global economic news is bearish for energy demand and crude prices. Losses in crude are limited on speculation that Europe and its allies will ramp up sanctions on Russia for not seeking to end the war in Ukraine.
Today's global economic news was mainly weaker-than-expected, a negative factor for energy demand and crude prices. The University of Michigan US Aug consumer sentiment index was revised lower by -0.4 to 58.2, weaker than expectations of no change at 58.6. Also, the US Aug MNI Chicago PMI fell -5.6 to 41.5, weaker than expectations of 46.0. In addition, German Jul retail sales fell -1.5% m/m, weaker than expectations of no change and the biggest decline in almost two years. Finally, Japan's Jul industrial production fell -1.6% m/m, weaker than expectations of -1.1% m/m and the largest decline in 8 months.
Crude prices have support on concerns that the ongoing war in Ukraine could lead to additional sanctions on Russian energy exports, reducing global oil supplies. Today, German Chancellor Merz and French President Macron called for secondary sanctions on Russia for its war in Ukraine. They said they will push for measures targeting "companies from third countries that support Russia's war." President Trump also threatened "very big consequences" if Russia doesn't come to the negotiating table. On Thursday, German Chancellor Merz stated that a meeting between Russian President Putin and Ukrainian President Zelensky was unlikely to occur.
An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +11% w/w to 96.77 million bbl in the week ended August 22.
Concerns about higher OPEC production are negative for crude prices after OPEC+ on August 2 endorsed an additional 547,000 bpd increase in its crude production for September 1. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026. OPEC+ has 1.66 million bpd of supplies that are currently due to remain offline until late 2026. OPEC+ will meet again on September 7. OPEC July crude production fell by -20,000 bpd to 28.31 million bpd.
Wednesday's weekly EIA report showed that (1) US crude oil inventories as of August 22 were -5.2% below the seasonal 5-year average, (2) gasoline inventories were -0.3% below the seasonal 5-year average, and (3) distillate inventories were -14.8% below the 5-year seasonal average. US crude oil production in the week ending August 22 rose by +0.4% w/w to 13.439 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ending August 22 fell by -1 to 411 rigs, just above the 3.75-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 5.25-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.
