Crude Falls on Dollar Strength and Global Energy Demand Concerns

Dec WTI crude oil (CLZ22) this morning is down by -1.45 (-1.63%), and Dec RBOB gasoline (RBZ22) is down by -3.29 (-1.26%).  Dec Nymex natural gas (NGZ22) is up +0.478 (+8.13%).

Crude oil and gasoline prices this morning are moderately lower.  A stronger dollar today is undercutting energy prices.  Also, concern that U.S. economic growth and energy demand will slow is weighing on crude prices after Fed Governor Waller said, "we've still got a ways to go" before the Fed stops raising interest rates.  In addition, Chinese energy demand concerns weighed on crude oil prices after news that Chinese Covid infections rose to a new 6-month high.  

Dec nat-gas this morning is sharply higher on concern a cold snap in the U.S. will boost heating demand for nat-gas.  The Commodity Weather Group said today that below to well-below temperatures are expected across nearly all the lower 48 U.S. states at least through November 23.

Chinese energy demand concerns continue to be an underlying bearish for crude prices after China reported 15,525 new Covid infections on Sunday, the most in over six months.  Nomura reported that more than 10% of China's total gross domestic product was under some form of lockdown as of November 3.  However, there are hopes for an easing of some restrictions.  China last Friday cut the time foreign travelers into China must quarantine to five days in a hotel or government facility, followed by three days confined at home from the current policy of 10 days in quarantine.  Also, China scrapped the system that penalized airlines for bringing virus cases into China.  Ctrip.com reported that booking for flights into China doubled in the hour after the government announced an easing of restrictions for inbound travelers.

In a bullish factor, Vortexa reported today that the amount of crude stored on tankers that have been stationary for at least a week fell -8.2% w/w to 79.92 million bbls in the week ended November 11.

OPEC+ on October 5 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.  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 since some members are already pumping well below their quotas.  OPEC crude production in October rose +30,000 bpd to a 2-1/2 year high of 29.98 million bpd.  

Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of November 4 were -2.2% below the seasonal 5-year average, (2) gasoline inventories were -6.2% below the seasonal 5-year average, and (3) distillate inventories were -18.2% below the 5-year seasonal average.  U.S. crude oil production in the week ended November 4 rose +1.7% w/w to 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 November 11 rose by +9 rigs to a 2-1/2 year high of 622 rigs.  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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