October WTI crude oil (CLV25) today is up +0.99 (+1.58%), and October RBOB gasoline (RBV25) is up +0.0190 (+0.95%).
Crude oil and gasoline prices are moving higher today due to a weak dollar. Also, escalation of geopolitical risks in Europe gave oil prices a boost after Poland shot down drones that crossed into its territory during Russia's latest air strike on Ukraine, calling it an "act of aggression." Crude prices are climbing today despite a bearish EIA inventory report that showed weekly crude supplies unexpectedly expanded and gasoline stockpiles rose more than expected.
Escalation of geopolitical risks in Europe and the Middle East are bullish for crude prices. Geopolitical tensions in Europe escalated today after Poland shot down Russian drones that crossed into its territory in Russia's latest attacks on Ukraine. Also, Israel on Tuesday launched a strike on Doha, Qatar, targeting the senior leadership of Hamas. Qatar said the attack by Israel violated international law and threatens to widen the conflict in the Middle East, the source of about one-third of global oil supplies.
Crude prices also have support after OPEC+ agreed on Sunday to raise its crude production by 137,000 bpd, starting in October. This is less than the 547,000 bpd increase the group decided to boost output in September and August. OPEC+ also said restarting the remainder of the 1.66 million bpd crude production it had idled will be contingent on "evolving market conditions."
Reduced Russian crude output is tightening global oil supplies and is supportive of prices. Ukrainian drone and missile attacks on Russian refineries have curbed Russia's crude-processing runs to 5.09 million bpd in the first 27 days of August, the lowest monthly average in over 3.25 years.
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. President Trump today told EU officials he's willing to slap new tariffs on India and China, the top importers of Russian crude, in an effort to get Russia to end the war in Ukraine, but only if EU nations do so as well.
A bearish factor for crude was Monday's action by Saudi Arabia to cut prices for all of its crude grades today by $1 a barrel for buyers in Asia for delivery in October, a sign of weak demand for crude and a steeper cut than expectations of a -50 cents per barrel reduction.
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 +6.8% w/w to 77.69 million bbl in the week ended September 5.
Concerns about higher OPEC production are negative for crude prices as 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 production capacity that is due to remain offline until late 2026. OPEC Aug crude production rose by +400,000 bpd to 28.55 million bpd, the highest in over two years.
Today's weekly EIA report was bearish for crude and products. EIA crude inventories unexpectedly rose +3.94 million bbl versus expectations of a -1.4 million bbl draw. Also, EIA gasoline supplies rose by +1.5 million bbl, above expectations of +500,000 bbl. In addition, EIA distillate stockpiles rose +4.7 million bbl to an 8-month high, well above expectations of a +24,000 bbl build. On the positive side, crude supplies at Cushing, the delivery point of WTI futures, fell by -365,000 bbl.
Today's EIA report showed that (1) US crude oil inventories as of September 5 were -3.2% below the seasonal 5-year average, (2) gasoline inventories were -0.6% below the seasonal 5-year average, and (3) distillate inventories were -10.4% below the 5-year seasonal average. US crude oil production in the week ending September 5 rose by +0.5% w/w to 13.495 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 September 5 rose by +2 to 414 rigs, just 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.
