January WTI crude oil (CLF26) on Wednesday closed up +0.70 (+1.21%), and January RBOB gasoline (RBF26) closed up +0.0251 (+1.39%).
Crude oil and gasoline prices are settled higher on Wednesday. Dollar weakness on Wednesday boosted crude prices. Also, doubts about a deal to end the Russian-Ukrainian war sparked some short covering in crude on Wednesday after European Commission Vice President Kallas said today that "we see no indication from Russia that they want peace." Crude prices raced to their highs on Wednesday afternoon after a Baker Hughes report showed active US oil rigs fell to a 4-year low, signaling smaller US oil production in the near term. Crude prices rose on Wednesday despite a bearish weekly EIA inventory report.
Oil prices are supported by news of reduced crude exports from Russia, after last Wednesday's data from Vortexa showed Russia's oil product shipments fell to 1.7 million bpd in the first 15 days of November, the lowest in more than 3 years. Ukraine has targeted at least 28 Russian refineries over the past three months, exacerbating a fuel crunch in Russia and limiting Russia's crude export capabilities. Ukraine knocked out 13% to 20% of Russia's refining capacity by the end of October, curtailing production by as much as 1.1 million bpd. New US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.
Oil prices have underlying support from ongoing geopolitical risks related to the US military buildup for a possible attack on Venezuela, the world's 12th-largest oil producer.
Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose +9.7% w/w to 114.31 million bbls in the week ended November 21, the highest level in 2.25 years.
Earlier this month, OPEC revised its Q3 global oil market estimates from a deficit to a surplus, as US production exceeded expectations and OPEC also ramped up crude output. OPEC said it now sees a 500,000 bpd surplus in global oil markets in Q3, versus last month's estimate for a -400,000 bpd deficit. Also, the EIA raised its 2025 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month.
OPEC+ at its November 2 meeting announced that members will raise production by +137,000 bpd in December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. The IEA in mid-October forecasted a record global oil surplus of 4.0 million bpd for 2026. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC's October crude production rose by +50,000 bpd to 29.07 million bpd, the highest in 2.5 years.
Today's weekly EIA report is bearish for crude and products. EIA crude inventories unexpectedly rose by +2.77 million bbl versus expectations of a decline of -2.36 million bbl. Also, EIA gasoline supplies rose by +2.5 million bbl, a larger build than expectations of +1.16 million bbl. In addition, EIA distillate stockpiles rose by +1.1 million bbl, a larger build than expectations of +340,000 bbl.
Today's EIA report showed that (1) US crude oil inventories as of November 21 were -3.8% below the seasonal 5-year average, (2) gasoline inventories were -3.3% below 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 November 21 fell -0.1% w/w to 13.814 million bpd, falling further back from the record high of 13.862 million bpd from the week of November 7.
Baker Hughes reported Wednesday that the number of active US oil rigs in the week ending November 28 fell by -12 to a 4-year low of 407 rigs. 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.
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