Oct WTI crude oil (CLV22) this morning is up +1.50 (+1.83%), and Oct RBOB gasoline (RBV22) is up +2.98 (+1.29%). Oct Nymex natural gas (NGV22) is up by +0.097 (+1.24%).
Crude oil and gasoline prices today recovered from 7-3/4 month lows and are moderately higher. Stronger than expected global economic news today signaled strength in energy demand that is bullish for prices. Crude maintained moderate gains on this morning's mixed weekly EIA report.
Oct nat-gas this morning is moderately higher. A smaller-than-expected build in weekly EIA nat-gas inventories boosted prices after weekly nat-gas supplies rose +54 bcf, slightly below expectations of +55 bcf. Also, forecasts for hotter U.S. temperatures are bullish for prices. Forecaster Atmospheric G2 said today that above-normal temperatures are expected across a large portion of the U.S. except for the Southeast and West Coast from September 13-17.
Today's global economic news was better-than-expected and supportive of crude oil demand and prices. U.S. weekly initial unemployment claims unexpectedly fell -6,000 to a 3-month low of 222,000, showing a stronger labor market than expectations of an increase to 235,000. Also, Japan's Q2 GDP was revised upward to +3.5% (q/q annualized) from 2.2%, stronger than expectations of +2.9%.
A bearish factor for crude is the outlook for reduced crude oil demand in China, the world's largest crude importer. About 65 million people across China are now subject to restrictions in their mobility due to pandemic lockdowns. Chinese authorities today extended a pandemic lockdown in Chengdu, a city of 21 million, through next Wednesday. On Wednesday, China imposed a lockdown on Guiyang, a city of 6.1 million people. Chinese refineries in July handled the least amount of oil since March 2020 as Covid lockdowns and refinery shutdowns for maintenance undercut crude demand. As a result, China's apparent oil demand in July fell -9.7% y/y to 12.16 million bpd, and China's Jan-July apparent oil demand is down -4.6% y/y to 12.74 million bpd.
Crude oil prices garnered support after OPEC+ on Monday agreed to cut its crude production level by 100,000 bpd in October, its first cut in production in more than a year. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said, "the simple tweak in production shows that OPEC+ will be attentive, preemptive and pro-active" in managing crude markets.
Reduced crude production in Libya is supportive of oil prices after Libya's state-run National Oil Corp said Tuesday that Libyan crude production had dropped more than -100,000 bbl to 1.1 million bpd, down from the 1.226 million bpd it produced last week.
Oil prices are seeing support from the dim prospects for a nuclear deal with Iran that would lift sanctions against Iran and allow its crude back onto the global markets. The European Union's chief negotiator said Monday that the chances of an imminent agreement between Iran and world powers on a nuclear deal have faded.
In a bullish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week fell -1.5% w/w to 93.09 million bbls in the week ended September 2.
OPEC+ production in August rose by +590,000 bpd to a 2-1/4 year high of 29.640 million bpd, according to the IEA, but is still running more than 2 million bpd below quotas due to various supply disruptions and capacity constraints. Nigerian and Libyan crude output has fallen in recent months due to damaged pipelines in Nigeria and political unrest in Libya, undercutting the overall OPEC+ production level.
Today's weekly EIA report was mixed for energy prices. On the bullish side, crude supplies at Cushing, the delivery point for WTI futures, fell -501,000 bbl. On the bearish side, EIA crude inventories unexpectedly rose +8.85 million bbl versus expectations of a -1.9 million bbl draw. Also, EIA gasoline stockpiles unexpectedly rose +333,000 bbl versus expectations of a -1.9 million bbl draw.
Today's EIA report showed that (1) U.S. crude oil inventories as of September 2 were -3.4% below the seasonal 5-year average, (2) gasoline inventories were -6.9% below the seasonal 5-year average, and (3) distillate inventories were -23.3% below the 5-year seasonal average. U.S. crude oil production in the week ended September 2 was unchanged at 12.1 million bpd, which is only -1.0 million bpd (-7.6%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended September 2 fell by -9 rigs to 596 rigs from the 2-1/4 year high of 605 rigs posted in the week ended July 29. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
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