Feb WTI crude oil (CLG23) on Friday closed up +1.86 (+2.37%), and Feb RBOB gasoline (RBG23) closed up +10.16 (+4.27%). Â
Crude oil and gasoline prices Friday rallied sharply, with gasoline climbing to a 5-week high. Â Friday's slump in the dollar index (DXY00) to a 6-1/2 month low was bullish for energy prices. Â Crude prices also rose on the potential for a rebound in Chinese fuel demand after the Chinese government abruptly ended its Covid restrictions.
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.
Strength in the crude crack spread is positive for energy prices after the crack spread rose to a 1-1/4 month high Friday. Â A higher crack spread encourages refiners to boost their crude purchases to refine the crude into gasoline and distillates. Â
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 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 Friday that active U.S. oil rigs in the week ended December 30 fell by -1 rig to 621 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 Gains on Dollar Weakness and Chinese Energy Demand Optimism
- Crude Declines on China Covid Concerns and Rising EIA Crude Inventories
- 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
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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