Crude Recovers Early Losses as the Dollar Slumps

Dec WTI crude oil (CLZ22) this morning is up by +0.34 (+0.40%), and Dec RBOB gasoline (RBZ22) is down by -0.27 (-0.11%).  Dec Nymex natural gas (NGZ22) is up +0.067 (+1.13%).

Crude oil and gasoline prices this morning are mixed, with crude recovering from a 3-week low and gasoline dropping to a 2-week low.  Expectations of reduced global oil consumption weigh on crude prices after the IEA cut its Q4 global crude demand forecast.  Also, Chinese energy demand concerns are bearish for crude oil prices after news that Chinese Covid infections rose to a new 6-month high.  Crude recovered its losses today after the dollar index (DXY00) tumbled to a 3-month low.  Also, a rally in the S&P 500 today to a 2-month high has bolstered optimism in the economic outlook that is positive for energy demand.

Dec nat-gas is moderately higher today on the outlook for colder U.S. temperatures to boost heating demand for nat-gas.  The Commodity Weather Group said below-normal temperatures are expected across nearly all Lower 48 stares through November 18.  Also, another cold blast is expected in the Midwest and South toward the end of the month.

Crude prices fell back today after the International Energy Agency (IEA) forecast Q4 global oil consumption will decline -240,000 bpd y/y to 100.7 million bpd.

Chinese energy demand concerns remain an underlying bearish for crude prices after China reported more than 17,000 new Covid infections on Monday, 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.

Global economic data today was mixed for energy demand and crude prices.  On the negative side, China Oct industrial production rose +5.0% y/y, weaker than expectations of +5.3% y/y.  Also, China Oct retail sales unexpectedly fell -0.5% y/y, weaker than expectations of +0.7% y/y and the biggest decline in 5 months.  In addition, Japan Q3 GDP unexpectedly contracted -1.2% annualized y/y, weaker than expectations of +1.2% y/y.  On the bullish side, the German Nov ZEW expectations of economic growth rose +22.5 to a 5-month high of -36.7, stronger than expectations of -51.0.  Also, the U.S. Nov Empire manufacturing survey general business conditions rose +13.6 to a 4-month high of 4.5, stronger than expectations of -6.0.

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 -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.

• Crude Oil is Losing Its Viscosity as Traders Slip Away From the Asset
• Nat-Gas Prices Gain on Below-Normal U.S. Temps
• Crude Sharply Lower on Chinese Energy Demand Concerns
• Crude Falls on Dollar Strength and Global Energy Demand Concerns