Nov WTI crude oil (CLX22) this morning is up +0.28 (+0.36%), and Nov RBOB gasoline (RBX22) is up +2.40 (+1.04%). Â Oct Nymex natural gas (NGV22) is down by -0.083 (-1.22%).
Crude oil and gasoline prices this morning are moderately lower, with crude falling to an 8-1/2 month low and gasoline falling to a 2-week low. Â A rally in the dollar index today to a new 20-year high is undercutting most commodity prices. Â Also, the energy markets are worried about a global recession due to the sharp increase in global interest rates. Â Crude prices this morning briefly recovered their losses and moved into positive territory after the dollar fell back from its best levels.
Oct nat-gas is moderately lower today and posted a 2-1/4 month low. Â The outlook for mild U.S. fall weather will curb heating demand for nat-gas and is bearish for prices. Â Forecaster Atmospheric G2 said today that above-average temperatures are seen across the central and western U.S. from October 1-5, with near-normal temperatures expected in the East.
Global economic news today was weaker than expected and negative for energy demand and crude  prices.  The U.S. Aug Chicago Fed national activity index fell -0.29 to 0.0, weaker than expectations of a decline to 0.23.  Also, the U.S. Sep Dallas Fed manufacturing outlook level of general business activity unexpectedly fell -4.3 to -17.2, weaker than expectations of an increase to -9.0.  In addition, the German Sep IFO business climate index fell -4.3 to a 2-1/4 year low of 84.3, weaker than expectations of 87.0.  Finally, the Japan Sep Jibun Bank manufacturing PMI fell -0.5 to 51.0, the slowest pace of expansion in 20 months.
A slump in U.S. fuel demand is bearish for crude prices. Â The U.S. four-week average of distillate supplied, a measure of diesel demand, fell in the week ended September 16 below 2020 levels for a second week. Â Also, U.S. gasoline demand sank after the four-week average of U.S. gasoline demand fell to the lowest seasonal level since 1997.
Weakness in global air travel has curbed jet fuel demand and is bearish for crude prices. Â The global number of flights tacked by Flightradar24 dropped -5.4% m/m in the month to September 19 and was -16% lower than the equivalent of 2019 before the pandemic.
Crude oil prices have support as China eases some of its pandemic restrictions. Â China last Wednesday announced it is easing pandemic lockdowns in Chengdu, a city of 21 million people, which should boost economic activity and energy demand. Â China's Covid lockdowns have hurt Chinese energy demand in recent months. 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 Also, current crude demand remains weak as China's Bureau of Statistics today reported China Aug crude processing rose just +0.9% from July and was still down -8% y/y to 12.69 million bpd.
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 International Atomic Energy Agency (IAEA) recently said that "the information gap is bigger and bigger" on Iran's recent nuclear activities. Â Also, the European Union's chief negotiator recently said 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+ on September 5 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. Â 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. Â Libya's state-run National Oil Corp said September 6 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 the previous week.
In a bearish factor, Vortexa reported today that the amount of crude stored on tankers that have been stationary for at least a week rose +20% w/w to 112.51 million bbls in the week ended September 23.
Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of September 16 were -2.0% below the seasonal 5-year average, (2) gasoline inventories were -5.0% below the seasonal 5-year average, and (3) distillate inventories were -19.4% below the 5-year seasonal average. Â U.S. crude oil production in the week ended September 16 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 23 rose by +3 rigs to 602 rigs, just below 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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