Feb WTI crude oil (CLG23) on Thursday closed down -0.55 (-0.71%), and Feb RBOB gasoline (RBG23) closed up +0.46 (+0.19%). Â
Crude oil and gasoline prices Thursday settled mixed, with crude falling to a 1-week low. Â Concern that China's actions to end its Covid Zero policies will lead to a surge in global Covid infections as it reopens its borders is undercutting crude prices. Â Crude maintained moderate losses after weekly EIA crude inventories unexpectedly rose. Â Gasoline recovered from early losses and posted modest gains after weekly EIA gasoline supplies unexpectedly fell. Â Crude prices rebounded from their worst levels as the dollar (DXY00) weakened. Â
Crude oil moved lower Thursday on concern that there could be a global resurgence of Covid after China ended its Covid Zero policies and reopened its borders. Â A resurgence of Covid may keep people at home and reduce economic activity and energy demand. Â The U.S. and Italy announced Wednesday that all air passengers from China would be required to test for Covid after almost half of the passengers on two flights from China to Milan were found to be infected with the virus.
Crude oil prices have support after China said that it would reopen its borders from Covid curbs and eliminate quarantine restrictions for inbound travelers starting January 8. Â However, the impact of easing Covis restrictions is limited as soaring Covid infections in China have kept people at home, reducing economic activity and travel. Â In addition, air travel in China remains in a slump as a report from VariFlight shows the number of flights in China on December 22 fell to 42% of 2019 levels.
Crude oil prices have support after Russia's Deputy Prime Minister Alexander Novak was quoted by the state-run Tass news service last Friday as saying that Russia may cut production by 500,000-700,000 bpd in response to Europe’s partial oil embargo on Russian oil imports.  Russia has threatened to retaliate for the European oil embargo and price cap and may be trying to talk oil prices higher.  However, the embargo is having a significant impact, as Bloomberg reports that total oil shipment volume from Russia in mid-December fell sharply by -54%.
OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations. Â OPEC crude production in November fell 1.05 million bpd to a 5-month low of 28.79 million bpd.
In a bearish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +24% w/w to 84.42 million bbls in the week ended December 23.
Thursday's weekly EIA inventory report was mixed for energy prices. Â On the bearish side, EIA crude inventories unexpectedly rose +718,000 bbl versus expectations of a -1.2 million bbl draw. Â Also, EIA distillate supplies unexpectedly rose +283,000 bbl to a 10-month high versus expectations of a -1.0 million bbl draw. Â On the bullish side, Â EIA gasoline stockpiles unexpectedly fell -3.1 million bbl versus expectations of a +500,000 bbl build. Â Also, crude supplies at Cushing, the delivery point of WTI futures, fell by -195,000 bbl. Â
Thursday's EIA report showed that (1) U.S. crude oil inventories as of December 23 were -6.4% below the seasonal 5-year average, (2) gasoline inventories were -4.1% below the seasonal 5-year average, and (3) distillate inventories were -7.2% below the 5-year seasonal average. Â U.S. crude oil production in the week ended December 23 fell -0.8% w/w 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 December 23 rose by +2 rigs to 622 rigs, modestly below the 2-1/2 year high of 627 rigs posted on December 2. 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.
More Crude Oil News from Barchart
- Crude Falls on Covid Concerns and an Unexpected Build in EIA Crude Inventories
- Crude Oil Prices Close Lower Due to Strong Dollar and Weak Stocks
- Crude Prices Tumble as the Dollar Strengthens and Stocks Fall
- Crude Falls Back from a 3-Week High as Covid Surges Through China
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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