November WTI crude oil (CLX25) on Thursday closed down -0.81 (-1.39%), and November RBOB gasoline (RBX25) closed down -0.0227 (-1.24%).
Crude oil and gasoline prices gave up an early advance today and retreated, with crude sliding to a 5.25-month low and gasoline sinking to a 4.5-year nearest-futures low. Crude prices tumbled on Thursday after the weekly EIA report showed that crude inventories unexpectedly increased and US crude production rose to a record high. Losses in crude accelerated Thursday afternoon on speculation that Russian oil supplies will continue to flow after President Trump said he'll meet with Russian President Putin to discuss ending the war in Ukraine.
Crude prices initially moved higher on Thursday due to a weaker dollar, following a decline in the dollar index (DXY00) to a one-week low. Also, today's actions by the UK to curb Russian crude exports are supportive of oil prices. The UK on Thursday imposed sanctions on Rosneft PJSC and Lukoil PJSC, Russia's largest oil producers, as well as two Chinese energy firms and Indian refiner Nayara Energy Ltd, due to their handling of Russian fuel.
Crude oil is also under pressure following renewed trade tensions with China. A protracted US-China trade war would weigh on global economic growth and energy demand and is bearish for crude prices. Additionally, the IEA on Tuesday forecast a record global oil glut of 4.0 million bpd for 2026.
Cooling tensions in the Middle East have reduced some of the risk premium in crude prices, weighing on crude as it decreases the likelihood of disruptions to the region's crude supplies following the agreement between Israel and Hamas.
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 +8.9% w/w to 93.96 million bbl in the week ended October 10.
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 less than market expectations of a potential 500,000 bpd boost to production. 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 have 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.
Crude prices have support from concerns that the ongoing war in Ukraine could lead to additional sanctions on Russian energy exports, reducing global oil supplies. The US proposed that the G7 allies impose tariffs as high as 100% on China and India for their purchases of Russian oil in an effort to convince Russia to end the war in Ukraine.
Thursday's weekly EIA inventory report was mixed for crude and products. On the negative side, EIA crude inventories unexpectedly rose by +3.52 million bbl versus expectations of a -1.2 million bbl draw. Also, EIA gasoline supplies fell by -267,000 bbl, a smaller draw than expectations of -1.0 million bbl. On the positive side, EIA distillate stockpiles fell by -4.5 million bbl, a larger draw than expectations of -1.0 million bbl. Also, crude supplies at Cushing, the delivery point of WTI futures, fell by -703,000 bbl.
Thursday's EIA report showed that (1) US crude oil inventories as of October 10 were -3.4% below the seasonal 5-year average, (2) gasoline inventories were +0.1% above the seasonal 5-year average, and (3) distillate inventories were -6.9% below the 5-year seasonal average. US crude oil production in the week ending October 10 rose +0.1% w/w to a record 13.636 million bpd.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ending October 10 fell by -4 to 418 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.
