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Headlines
- Crude Oil Prices Lifted by Short Covering
- Energy Market Reacts to Supply Concerns
- Gasoline Prices Edge Higher Amid Market Volatility
October WTI crude oil is currently up by +1.09 (+1.52%), and October RBOB gasoline has risen by +2.13 (+1.04%).
Crude oil and gasoline prices, along with oil and gas stocks, are experiencing moderate gains today. Technical indicators have pointed to crude prices nearing oversold levels after hitting a two-week low on Wednesday. Additionally, crude prices are supported by a larger-than-expected drop in weekly EIA crude inventories, which fell to a six-and-a-half-month low.
Despite these gains, energy demand concerns are capping the rise in crude prices. Today's economic data highlighted weaker-than-anticipated US and Eurozone manufacturing activity, signaling a potential slowdown in energy consumption. The S&P August US manufacturing PMI dropped to 48.0, marking the weakest reading in eight months. Similarly, the Eurozone's PMI fell slightly to 45.6, missing expectations.
China's energy demand also remains under scrutiny, with July steel production declining by 9% year-on-year, the lowest level seen this year. This reduction hints at weak industrial and construction demand, reflecting broader economic challenges in the country.
In the US, signs of lower gasoline demand have led several refiners to reduce operations. Marathon Petroleum, the largest US refinery owner, plans to cut its refining capacity rate to 90% this quarter, the lowest for Q3 since 2020. Other refiners, such as PBF Energy and Phillips 66, are also reducing their capacity utilization to multi-year lows.
Geopolitical tensions continue to provide a backdrop of uncertainty. The risk of an escalation in the Middle East, particularly involving Iran and Israel, remains a concern for global crude oil supplies. Ongoing conflicts and attacks on commercial shipping routes have already disrupted some shipments, forcing diversions around the southern tip of Africa.
On the supply side, increased Russian crude production has been a factor in limiting price increases. Russia's Energy Ministry reported that July's crude production exceeded the agreed output target with OPEC+. However, a decline in worldwide crude oil held on tankers is offering some support to prices. Vortexa reported that stationary crude oil on tankers fell by 4.1% week-on-week, indicating tightening supplies.
OPEC+ has announced plans to restore some crude production in Q4, raising concerns about a potential oversupply in the global market. Despite the ongoing production cuts, OPEC's overall crude output in June fell slightly.
According to Wednesday's EIA report, US crude oil inventories are now 5.0% below the seasonal five-year average, gasoline inventories are 3.2% below the same average, and distillate inventories are down by 10.0%. US crude oil production has matched the record high of 13.4 million barrels per day.
Finally, Baker Hughes reported a slight decrease in active US oil rigs, which remain just above the recent two-and-a-half-year low. The number of active rigs has been declining since reaching a four-year high in December 2022.
