Oct WTI crude oil (CLV22) on Friday closed up +3.25 (+3.89%), and Oct RBOB gasoline (RBV22) closed up +8.70 (+3.71%). Â
Crude oil and gasoline prices Friday rallied sharply. Â Friday's decline in the dollar index (DXY00) to a 1-1/2 week low is bullish for energy prices. Â Also, Friday's rally in the S&P 500 to a 1-1/2 week high boosts confidence in the economic outlook that is positive for crude demand and prices.
Crude prices Thursday sank to a 7-3/4 month nearest-futures low on the outlook for reduced crude oil demand in China, the world's largest crude importer. Â About 65 million people across China are now subject to restrictions in their mobility due to pandemic lockdowns. Â Chinese authorities on Thursday extended a pandemic lockdown in Chengdu, a city of 21 million, through next Wednesday. Â On Wednesday, China imposed a lockdown on Guiyang, a city of 6.1 million people. Â Chinese refineries in July handled the least amount of oil since March 2020 as Covid lockdowns and refinery shutdowns for maintenance undercut crude demand. Â 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. Â
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. Â 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. Â 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. Â 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.
Thursday'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. Â 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 Friday that active U.S. oil rigs in the week ended September 9 fell by -5 rigs to 591 rigs from the 2-1/4 year high of 605 rigs posted in the week ended July 29. Â 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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