January WTI crude oil (CLF26) on Wednesday closed up +0.21 (+0.36%), and January RBOB gasoline (RBF26) closed down -0.0082 (-0.46%).
Crude oil and gasoline prices extended this week’s losses on Wednesday, with crude posting a 2-week low and gasoline slumping to a 4.75-year nearest-futures low. However, crude oil erased its losses and rallied on Wednesday afternoon after US forces intercepted and seized a sanctioned oil tanker off the coast of Venezuela. The seizure may make it more difficult for Venezuela to export its oil, as other shippers are now likely to be more reluctant to load cargoes from Venezuela.
Crude prices initially retreated on Wednesday due to concerns about a global oil glut. Wednesday’s weekly EIA inventory report was mixed, as crude supplies fell more than expected while gasoline and distillate stockpiles rose more than expected.
Concerns about a global oil supply cut are bearish for prices after global commodities trader Trafigura said Tuesday that the global oil market is headed for a “super glut” next year as a wave of new supplies runs up against sluggish energy demand.
Weakness in the crude crack spread is a negative factor for oil prices. The crack spread fell to a 7-week low on Wednesday, discouraging refiners from purchasing crude oil and refining it into gasoline and distillates.
Also weighing on crude prices was last Thursday’s action by Saudi Arabian state producer Aramco to cut the price of its Arab Light crude oil for Asian customers by 30 cents/bbl for January delivery, the lowest since January 2021, a sign of weaker energy demand.
Geopolitical risks are supporting crude prices. Last Tuesday, Interfax reported that Russian President Putin threatened to attack ships from nations helping Ukraine if attacks on Russian vessels don’t stop. Recently, four Russian tankers have been attacked by drones in the Black Sea. Also, President Trump said airspace over Venezuela should be considered closed and that the US may soon start targeting drug cartels within Venezuela. Venezuela is the world’s 12th-largest oil producer.
Reduced crude exports from Russia are underpinning crude prices. On November 19, Vortexa data 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. Ukrainian drone and missile attacks recently damaged a Russian Baltic Sea oil terminal, forcing it to close. The Caspian Pipeline Consortium, which carries 1.6 million bpd of Kazakhstan’s crude exports, was forced to close after a pipeline was damaged at one of its moorings. New US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.
