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Headlines
- Crude Prices Climb as Dollar Weakens
- Powell's Comments Fuel Crude Oil Rally
- Economic Data Boosts Energy Markets
Crude oil and gasoline prices are on the rise, with October WTI crude oil gaining +1.54 (+2.11%) and October RBOB gasoline up +3.28 (+1.57%). This upward movement is primarily driven by the dollar index hitting a 7-1/2 month low and recent comments from Fed Chair Powell suggesting a potential interest rate cut. These developments have fostered a positive sentiment in asset markets, benefiting energy commodities and boosting oil and gas stocks.
Recent US economic data supports this trend. July new home sales increased by +10.6% month-over-month, reaching a 14-month high of 739,000, surpassing the expected 623,000. This robust performance signals strong economic health and bolsters confidence in energy demand.
Despite these positive factors, there are concerns about energy demand in China, the world's second-largest crude consumer. China's steel production in July dropped by -9% year-over-year to 82.94 million metric tons, indicating potential weakness in industrial and construction sectors.
In the US, refiners have adjusted operations in response to shifting gasoline demand. Marathon Petroleum plans to reduce its refining capacity to 90% this quarter, while PBF Energy and Phillips 66 also cut their capacity rates. These changes reflect a strategic response to market conditions.
Geopolitical tensions continue to influence crude prices. Concerns over potential conflicts in the Middle East, including possible retaliatory actions by Iran, could disrupt oil supplies in the region. Additionally, attacks on shipping routes by Iran-backed Houthi rebels are affecting global oil transport.
Russian crude production has increased, with July output reported at 9.045 million barrels per day, surpassing the OPEC+ target. However, a reduction in global crude oil held on tankers could provide price support, as reported by Vortexa, showing a -4.1% decrease in stored crude.
OPEC+ plans to gradually ease production cuts starting in October, which has raised concerns about potential over-supply in the market. OPEC’s crude production fell by -80,000 barrels per day in June, reaching 26.98 million barrels per day.
Recent data from the EIA reveals that US crude oil inventories were -5.0% below the seasonal 5-year average as of August 16, while gasoline inventories were -3.2% below the average, and distillate inventories were -10.0% below. US crude oil production has matched its record high of 13.4 million barrels per day.
Baker Hughes reported a decrease in active US oil rigs, with the number falling by -2 to 483 rigs, modestly above the 2-1/2 year low recorded in July. The number of active rigs has declined from the 4-year high of 627 rigs seen in December 2022.
