Crude Gains as IEA Raises its 2023 Global Crude Demand Forecast

Jan WTI crude oil (CLF23) this morning is up +1.53 (+2.03%), and Jan RBOB gasoline (RBF23) is up +4.38 (+2.03%).  Jan Nymex natural gas (NGF23) is down -0.324 (-4.67%).

Crude oil and gasoline prices this morning climbed to 1-week highs and are moderately higher.  A weaker dollar today is supportive of energy prices, along with the IEA's hike in its 2023 global crude demand forecast.  Crude prices fell back from their best levels after weekly EIA crude inventories rose more than expected.    

Jan nat-gas this morning is sharply lower after updated weather forecasts are looking less-cold than previous forecasts.  Forecaster Atmospheric G2 said the "forecast is slower to bring arctic cold south and east, resulting in warmer or less cold changes."   Additional losses in nat-gas prices may be limited as forecasts for below-normal temperatures across the U.S. from Dec 19-23 will boost heating demand for nat-gas.

Crude prices found support today after the International Energy Agency (IEA) raised its global 2023 oil demand forecast by +300,000 bpd to 1.7 million bpd, citing vigorous growth in India and an expected increase in demand in China.

A bullish factor for crude is the continued shutdown of the Keystone pipeline, which will tighten U.S. crude supplies.  TC Energy said it will provide an update later today about when it plans to resume the operation of the pipeline.  The Keystone pipeline can carry more than 600,000 bpd of crude and links oil fields in Canada to Cushing, OK, and to refiners on the U.S. Gulf Coast.  The pipeline has been closed since last Thursday after a 14,000-barrel crude oil leak.

Crude prices have support from strength in the crude crack spread, which rose to a 1-1/2 week high today.  A higher crack spread encourages refiners to boost their crude purchases to refine the crude into gasoline and distillates.

OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations.  OPEC crude production in November fell 1.05 million bpd to a 5-month low of 28.79 million bpd.

Concern about a delayed reopening of China's economy is bearish for energy demand and crude prices.  Covid cases are spreading rapidly in China after the country’s pandemic restrictions were unexpectedly eased last week.  Any new Covid restrictions would curb energy demand and delay the reopening of China's economy.

In an underlying supportive factor for crude oil prices, Europe as of December 5 embargoed nearly all seaborne oil imports from Russia.  In addition, Germany and Poland have pledged to halt pipeline oil imports from Russia of about 500,000 bpd as of year-end.

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 -3.1% w/w to 86.83 million bbls in the week ended December 9.

Today's weekly EIA crude report was mostly bearish for prices.  EIA crude inventories unexpectedly rose +10.23 million bbl versus expectations of -3.5 million bbl.  Also, EIA gasoline supplies rose +4.5 million bbl, more than expectations of +2.5 million bbl.  In addition, crude stockpiles at Cushing, the delivery point of WTI futures, rose +426,000 bbl.  On the positive side, EIA distillate supplies rose +1.36 million bbl, below expectations of +2.5 million bbl.

Today's EIA report showed that (1) U.S. crude oil inventories as of December 9 were -6.5% below the seasonal 5-year average, (2) gasoline inventories were -2.5% below the seasonal 5-year average, and (3) distillate inventories were -8.1% below the 5-year seasonal average.  U.S. crude oil production in the week ended December 9 fell -0.8% 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 December 9 fell by -2 rigs to 625 rigs, falling back slightly from the 2-1/2 year high of 627 rigs on December 2.  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 Rallies on Dollar Weakness and China Energy Demand Optimism
• Crude Rallies on Dollar Weakness and China Energy Demand Optimism
• Crude Sharply Higher as Keystone Pipeline Remains Closed
• Crude Soars as Keystone Pipeline Remains Shut