November WTI crude oil (CLX25) on Tuesday closed down -1.08 (-1.70%), and November RBOB gasoline (RBX25) closed down -0.0194 (-1.00%).
Crude oil and gasoline prices retreated on Tuesday, posting one-week lows. Crude prices fell for a second consecutive day on Tuesday, driven by concerns about a global supply glut as OPEC+ is set to increase its crude production levels. Tuesday's weaker dollar (DXY00) limited losses in crude.
Crude prices are being weighed down by the outlook for larger OPEC+ crude production. According to an OPEC delegate, the group this Sunday is expected to discuss fast-tracking its latest round of supply hikes in three monthly installments of about 500,000 bpd, starting in November, to return the remainder of a 1.66 million bpd supply cut. OPEC+ is boosting output to reverse the 2-year-long production cut and restore a total of 2.2 million bpd of production. OPEC's August crude production rose by 400,000 bpd to 28.55 million bpd, the highest in over two years.
Crude prices are also under pressure as the International Energy Agency (IEA) projects the global oil market is headed for a record surplus next year of 3.33 million bpd, about 360,000 bpd more than they projected a month ago, as OPEC+ continues to revive production.
The outlook for higher crude production in Iraq is also expected to boost global oil supplies, which is bearish for crude prices. Iraq last Monday 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 Thursday that the resumption of crude exports could add 500,000 bpd of fresh oil supplies to global markets.
Reduced crude demand from India, the world's third largest crude oil importer, is negative for oil price after India's Aug crude imports fell -2.9% y/y to 19.6 MMT.
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 +3.7% w/w to 81.95 million bbl in the week ended September 26.
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. President Trump said he thought NATO nations should shoot down Russian aircraft that violated their airspace and reiterated the need for Europe to cut its energy purchases from Russia. 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.
Ukraine has stepped up its attacks on Russian refineries and oil infrastructure, which is bullish for crude prices as it curbs Russian crude exports and tightens global oil supplies. Ukrainian drone and missile attacks on Russian refineries have curbed Russia's total refined-product flows to 1.94 million bpd in the first fifteen days of September, the lowest monthly average in over 3.25 years.
The consensus is that Wednesday’s weekly EIA crude inventories will increase by +1.5 million bbl, and gasoline supplies will climb by +500,000 bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of September 19 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -1.7% below the seasonal 5-year average, and (3) distillate inventories were -7.2% below the 5-year seasonal average. US crude oil production in the week ending September 19 rose by +0.1% w/w to 13.501 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 26 rose by +6 to 424 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.
