April WTI crude oil (CLJ23) on Thursday closed down -0.94 (-1.23%), and Apr RBOB gasoline (RBJ23) closed down -8.38 (-3.12%). Â
Crude oil and gasoline prices Thursday gave up early gains and dropped to 1-week lows. Â Crude retreated on concerns that Friday's monthly U.S. payroll report may be stronger than expected and force the Fed to raise interest rates aggressively. Â A tighter Fed policy would lead to higher interest rates that crimp economic growth and energy demand. Â Chinese energy demand concerns also weighed on crude prices after China Fed CPI and Feb PPI were weaker than expected. Â Crude prices Thursday initially moved higher on a weaker dollar.
A bearish factor for crude was Thursday's Chinese economic news that showed China Feb CPI and Feb PPI prices eased after the end of the Lunar New Year holiday, suggesting an economic rebound driven by the ending of Covid restrictions may take longer than expected. Â China Feb CPI rose +1.0% y/y, weaker than expectations of +1.9% y/y and the smallest pace of increase in a year. Â Also, Feb PPI fell -1.4% y/y, weaker than expectations of -1.3% y/y and the largest decline in over two years.
Weakness in the crude crack spread is bearish for crude prices. Â Thursday's crack spread fell to a 1-1/2 week low, discouraging refiners from purchasing crude oil to refine it into gasoline and distillates. Â
A negative factor for crude was the action by Chinese Premier Li Keqiang on Monday to announce a GDP growth target for China this year at around 5%, below expectations of above 5% and below the 2022 target of around 5.5%, which is bearish for energy demand.
In a bullish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week fell -6.1% w/w to 80.8 million bbl in the week ended March 3.
Indian buyers of Russian oil are struggling to obtain the crude as onerous demands from financiers wary of breaching Western sanctions are making it hard for Indian buyers to secure financing for their purchases of Russian crude. Â The inability to fund the purchases of Russian crude may force Indian buyers elsewhere to obtain crude supplies, which is bullish for oil prices. Â
Rising crude demand in India, the world's third-largest crude consumer, is bullish for prices. Â India's oil ministry predicts India's oil-products consumption will climb by +4.9% y/y to a record 233.8 MT in the 12 months from April. Â
On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia. Â Goldman Sachs predicts that OPEC+ will only start to reverse its supply cuts, currently at about 2 million bpd, in the second half of this year when accelerating demand will tighten the market. Â OPEC crude production in February rose by +120,000 bpd to 29.24 million bpd.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of March 3 were +7.8% above the seasonal 5-year average, (2) gasoline inventories were -4.2% below the seasonal 5-year average, and (3) distillate inventories were -8.1% below the 5-year seasonal average. Â U.S. crude oil production in the week ended March 3 fell -0.8% w/w to 12.1 million bpd, which is only 1.0 million bpd (-6.9%) 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 March 3 fell by -8 rigs to a 5-3/4 month low of 592 rigs, moderately 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 Energy News from Barchart
- Nat-Gas Slightly Lower on Ample U.S. Nat-Gas Inventories
- Crude Pushes Higher on a Weaker Dollar
- Crude Settles Moderately Lower on Dollar Strength and a Hawkish Fed
- Nat-Gas Sinks on Weakness in U.S. LNG Exports
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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