Feb WTI crude oil (CLG23) on Friday closed up +1.47 (+1.88%), and Feb RBOB gasoline (RBG23) closed up +5.75 (+2.32%). Â
Crude oil and gasoline prices Friday climbed to new 1-week highs and closed moderately higher. Â A decline in the dollar index to a 7-1/4 month low was bullish for energy prices. Â Also, optimism that Chinese energy demand will surge as the country reopens from pandemic restrictions is bullish for crude prices. Â Gains in crude accelerated Friday after the University of Michigan U.S. Jan consumer sentiment index rose more than expected to a 9-month high. Â
Crude prices have support from signs of stronger energy demand in China.  Demand for jet fuel in China has improved after capacity data from OAG today showed airline seat capacity for Northeast Asia, which includes China, jumped +10.2% w/w for the week ended January 9.  Also, domestic and international flights are set to soar in China during the week-long  Lunar New Year on January 21 with the removal of pandemic travel restrictions.
China boosted its crude import quotas on Monday, a sign from the world's largest crude importer that it is gearing up to meet higher demand. Â As of this week, China has issued a combined 132 million metric tons (MMT) of quotas for crude imports in 2023, well above the quota for 109 MMT at the same time last year. Â Â Â
Strength in the crude crack spread is bullish for oil prices. Â The crack spread Friday climbed to a 1-1/2 month high, encouraging refiners to boost their crude oil purchases and refine into gasoline and distillates.
Crude prices garnered support Wednesday on a forecast from Goldman Sachs for Brent crude to rally to $110 per bbl by Q3 if China and other Asian economies fully reopen from Covid restrictions. Â Also, ING Groep NV late Tuesday projected Brent crude prices would average $104 per barrel this year as China reopens and Russian supply drops. Â
Saudi Arabia's state-controlled Saudi Aramco last Thursday reduced its crude oil prices to customers, which was bearish for crude oil prices. Â Saudi Aramco cut its price of Arab Light grade crude to Asian customers for delivery in Feb by -$1.45 per barrel and also cut prices for its customers in Europe and the Mediterranean region.
Increased OPEC crude output is bearish for oil prices. Â OPEC Dec crude production rose +150,000 bpd to 29.140 million bpd. Â OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations. Â OPEC+ will meet again on February 1 to discuss its production targets.
Crude oil prices found support after Russia's Deputy Prime Minister Alexander Novak said in late December that Russia might cut production by 500,000-700,000 bpd in response to Europe’s partial oil embargo on Russian oil imports.  The European embargo is having a significant impact, as Bloomberg reports that total oil shipment volume from Russia in mid-December fell sharply by -54%.
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 -5.9% w/w to 89.52 million bbl in the week ended January 6.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of January 6 were +0.4% above the seasonal 5-year average, (2) gasoline inventories were -7.0% below the seasonal 5-year average, and (3) distillate inventories were -17.1% below the 5-year seasonal average. Â U.S. crude oil production in the week ended January 6 rose +0.8% w/w to 12.2 million bpd, which is only 0.9 million bpd (-6.9%) 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 January 13 rose by +5 rigs to 623 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.
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More Crude Oil News from Barchart
- Crude Prices Underpinned on the Outlook for Stronger Chinese Oil Demand
- Crude Settles Higher on Dollar Weakness and Outlook for Less Fed Tightening
- Crude Rallies on Dollar Weakness and Outlook for Less Fed Tightening
- Crude Sharply Higher on China Energy Demand Optimism
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. For more information please view the Barchart Disclosure Policy here.
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