Crude Oil Brent Futures Market News and Commentary
July WTI crude oil (CLN19) on Friday closed up by +0.72 (+1.24%) and July Brent crude oil (CBN19) closed up by +0.93 (+1.37%). July RBOB gasoline (RBN19) closed up by +0.0222 (+1.17%). The energy complex on Friday recovered somewhat from Thursday's plunge after the dollar index fell to a 1-week low. Energy prices extended their gains Friday in afternoon trade after weekly data from Baker Hughes showed active U.S. oil rigs fell by -5 rigs in the week ended May 24 to 797 rigs, the fewest in 14-1/2 months. On the negative side was Friday's weaker-than-expected U.S. economic data that was negative for energy demand. The Apr durable goods orders report of -2.1% and unchanged ex-transportation was slightly weaker than expectations of -2.0% and +0.1% ex-transportation. Jul WTI crude on Thursday dropped to a 2-1/4 month low and July Brent crude and Jul RBOB gasoline fell to 1-3/4 month lows on demand concerns caused by the worsening of the US/Chinese trade conflict, which is likely to undercut energy demand by the world's two largest oil consumers. Also, Wednesday's weekly EIA report was negative as it showed U.S. crude inventories jumped +4.75 million bbl in the week of May 17 to a 1-3/4 year high of 476.775 million bbl and U.S. crude production rose +0.8% in the week of May 17 to 12.2 million bpd, just below the April 26 record high of 12.3 million bpd. Crude prices on Monday rallied to a 3-week high on the outlook for OPEC+ to extend its crude production cuts past June after Saudi Energy Minister Khalid Al-Falih urged OPEC+ members at a meeting in Jeddah over the weekend to "stay the course" on crude oil output cuts. Wednesday's EIA data showed that U.S. crude oil inventories as of May 17 were +4.9% above the 5-year average, gasoline inventories were -0.5% below the 5-year average, and distillate inventories were -3.7% below the 5-year average. Big Picture Crude Oil Market Factors: Bullish factors include (1) the agreement by OPEC+ on Dec 7 to cut crude oil production by 1.2 million bpd for the first six months of 2019 (800,000 bpd for OPEC members), which should soak up much of the expected 2019 global oil surplus, (2) the -295,000 bpd decline in OPEC Mar crude production to a 4-year low of 30.385 million bpd, (3) the Trump administration's announcement that the U.S. will not renew waivers that let countries buy Iranian oil without facing U.S. sanctions, (4) heightened Iran tensions in the Middle East after attacks on Saudi Arabia's ships and facilities and the U.S. action to send a carrier group and bombers to the Middle East, and (5) the sharp drop in Iranian oil production from U.S. sanctions and in Venezuela oil production from U.S. sanctions and the economic crisis. Bearish factors include (1) stalled U.S./China trade talks that cause concern the ongoing U.S./China trade conflict will drag global growth and energy demand lower, (2) a rally in the dollar index to a 2-year high, (3) the recent surge in U.S. oil production to a record high of 12.3 million bpd although production, and (4) ample current supplies with U.S. crude oil inventories as of May 17 at a 1-3/4 year high of 476.775 million bbl, +4.9% above the 5-year average.