Crude Oil Higher on Dollar Weakness and Stronger Chinese Demand

December WTI crude oil (CLZ25) on Friday closed up +0.32 (+0.54%), and December RBOB gasoline (RBZ25) closed down -0.0253 (-1.29%).

Crude oil and gasoline prices settled mixed on Friday.  Dollar weakness supported crude prices on Friday, when the dollar index (DXY00) fell to a 1-week low.  Also, strength in crude demand from China, the world’s second-largest crude consumer, is supportive of prices, after a report on Friday showed that China’s Jan-Oct crude imports rose +3.1% y/y to 471 MMT.

Economic concerns limited gains in crude on Friday after US Nov consumer sentiment fell to a nearly 3.5-year low and after the S&P 500 dropped to a 2-week low, which undercuts confidence in the economic outlook and energy demand.  Demand concerns are also weighing on oil prices after Saudi Arabia on Thursday lowered the price of its main crude grade to Asia for delivery next month to the lowest level in 11 months.

Thursday’s action by Saudi Arabia’s state producer, Aramco, to cut the price of its Arab Light crude by $1.20 a barrel to an 11-month low for Asian customers with December delivery signals weakened energy demand and is bearish for oil prices.

Oil prices also have support on recent reports that the US military may be on the verge of launching military strikes on Venezuela, which is the world’s 12th largest oil producer.

OPEC+ at its meeting on Sunday announced that members will raise production by 137,000 bpd for 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.

Reduced crude exports from Russia are supportive of oil prices.  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.  Ukrainian drone and missile attacks on Russian refineries and oil export terminals curbed Russia’s total seaborne fuel shipments to 1.88 million bpd in the first ten days of October, the lowest average in over 3.25 years, and have knocked out 13% to 20% of Russia’s refining capacity by the end of October, curbing 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.

Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -11% w/w to 86.91 million bbls in the week ended October 31.

Wednesday’s EIA report showed that (1) US crude oil inventories as of October 31 were -5.3% below the seasonal 5-year average, (2) gasoline inventories were -4.3% below the seasonal 5-year average, and (3) distillate inventories were -8.8% below the 5-year seasonal average.  US crude oil production in the week ending October 31 rose +0.1% w/w to a record high of 13.651 million bpd.

Baker Hughes reported Friday that the number of active US oil rigs in the week ending November 7 was unchanged at 414 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.

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. This article was originally published on Barchart.com