Crude Pushes Higher on the Outlook for Tighter Global Supplies

Nov WTI crude oil (CLX22) this morning is up +2.89 (+3.27%), and Nov RBOB gasoline (RBX22) is up +3.08 (+1.15%). Nov Nymex natural gas (NGX22) is down by -0.193 (-2.77%).

Crude oil and gasoline prices this morning are moderately higher and posted 5-week highs.  Crude prices this morning extended this week's rally on carry-over support from Wednesday when OPEC+ cut its crude production target by a larger than expected -2.0 million bpd.  Gains in crude accelerated this morning after India reported an increase in its oil products consumption.

Nov nat-gas prices this morning are moderately lower.  Nat-gas prices this morning are lower on negative carry-over from Thursday when weekly EIA nat-gas inventories rose more than expected, easing supply concerns.  U.S. nat-gas supplies are now down only -5.5% y/y, the smallest shortfall in 9 months.  Also, a decline in European nat-gas prices today to a 2-1/2 month low is weighing on U.S. nat-gas prices.

Crude oil prices had carry-over support from Wednesday when OPEC+ agreed to cut its collective output by -2.0 million bpd for November and December, a bigger cut than expectations of -1.0 million bpd.  The reaction to the cut in OPEC+ crude production was initially tempered as a cut in output would not necessarily lead to a commensurate drop in actual barrels since many OPEC+ producers cannot meet their production quotas in full, given supply constraints.  Saudi Arabia's energy minister said the real-world impact of the crude production cuts would likely be around 1 million to 1.1 million bpd from November, given some members are already pumping well below their quotas.  

Stronger crude demand in India, the world's third-largest crude-consuming nation, is bullish for oil prices.  India's Oil Ministry today reported that India's Sep oil products consumption rose +8.1% y/y to 17.2 MMT.

Comments from Nigeria's oil minister Wednesday were bullish for crude prices when he said OPEC wants crude prices around $90 per barrel and "we have to take every step to ensure prices remain" within this range.

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 -17% w/w to 91.19 million bbls in the week ended September 30.

OPEC crude production in September rose +230,000 bpd to a 2-1/2 year high of 29.89 million bpd.  An increase in crude exports from Libya is bearish for oil prices after Libya Sep crude exports jumped +25% m/m to 1.16 million bpd, a 14-month high.

Crude oil prices have support as China eases some of its pandemic restrictions.  China's Covid lockdowns have hurt Chinese energy demand in recent months.  Chinese refineries in July handled the least amount of oil since March 2020 as Covid lockdowns and refinery shutdowns for maintenance undercut crude demand.  Also, current crude demand remains weak as China's Bureau of Statistics 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.  The International Atomic Energy Agency (IAEA) recently said that "the information gap is bigger and bigger" on Iran's recent nuclear activities.  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."

Wednesday's EIA report showed that (1) U.S. crude oil inventories as of September 30 were -2.6% below the seasonal 5-year average, (2) gasoline inventories were -8.5% below the seasonal 5-year average, and (3) distillate inventories were -21.4% below the 5-year seasonal average.  U.S. crude oil production in the week ended September 30 was unchanged at 12.0 million bpd, which is only -1.1 million bpd (-8.4%) 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 30 rose by +2 rigs to 604 rigs, just below 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.

• Crude Closes Moderately Higher on Global Supply Concerns
• Crude Prices Underpinned on OPEC+ Production Cuts
• Crude Rallies on OPEC+ Production Cuts and Tighter EIA Inventories
• Crude Climbs as OPEC+ Cuts Production and EIA Inventories Fall