Oct WTI crude oil (CLV22) this morning is down -1.04 (-1.18%), and Oct RBOB gasoline (RBV22) is up +0.23 (+0.09%). Oct Nymex natural gas (NGV22) is up by +0.030 (+0.36%).
Crude oil and gasoline prices this morning are mixed. A rally in the dollar index today is bearish for energy prices. Also, today's sharp selloff in stock undercuts confidence in the economic outlook that is bearish for crude demand and prices. Gasoline prices are slightly higher on signs of tight supplies on the U.S. West Coast.
Oct nat-gas today is moderately higher on the outlook for warmer U.S. temperatures to boost nat-gas demand from electricity suppliers to power increased air conditioning usage. The Commodity Weather Group today said that above-normal temperatures are forecast from Texas to New York from September 18-22.
Energy demand worries are weighing on crude prices as today's stronger-than-expected U.S Aug CPI report may push the Fed to keep aggressively hiking interst rates, which risks sending the economy into recession and reducing energy demand.
Gasoline prices have support from signs of tight supplies on the U.S. West Coast as EIA data show gasoline inventories on the West Coast have fallen to the lowest seasonal level since 1997.
Crude prices are being undercut by 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 last Thursday extended a pandemic lockdown in Chengdu, a city of 21 million, through September 14. Last 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.
Oil prices are also 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 International Atomic Energy Agency (IAEA) on Monday said that "the information gap is bigger and bigger" on Iran's recent nuclear activities. Also, the European Union's chief negotiator said Saturday that "in light of Iran's failure to conclude the agreement on the table, we will consult with our international partners on how best to deal with Iran's continued nuclear escalation."
Crude oil prices garnered support after OPEC+ last 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 last 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.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +11% w/w to 92.32 million bbls in the week ended September 9.
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.
Last 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. 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 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. 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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