Crude Oil Rallies as OPEC+ Discusses Market Balance

April WTI crude oil (CLJ23) on Thursday closed up +0.74 (+1.09%), and Apr RBOB gasoline (RBJ23) closed up +6.51 (+2.67%).  

Crude oil and gasoline prices Thursday recovered from early losses and closed moderately higher.  Short covering in crude emerged Thursday after Saudi Energy Minister Prince Abdulaziz bin Salman met with Russian Deputy Prime Minister Novak to discuss "oil markets and efforts of the OPEC+ group to promote market balance and stability."  Also, a weaker dollar Thursday was supportive of energy prices.

Crude prices Thursday initially moved lower on concern that worsening global financial conditions could undercut economic growth and energy demand.  Also, Thursday's +50 bp rate hike by the ECB risks slowing economic growth further, a bearish factor for energy demand.

A bullish factor for crude was Thursday's action by the ECB to raise its 2023 Eurozone GDP forecast to +1.0% from a prior forecast of +0.5%, which was positive for energy demand.

A bearish factor for crude was Wednesday's monthly report from the International Energy Agency (IEA) that said global crude supplies would "comfortably" exceed demand in the first half of this year.  The IEA reported that global oil inventories surged by 52.9 million bbl in Jan to 7.8 billion bbl, the highest in 1-1/2 years.

A negative factor for crude was JPMorgan Chase's projection Monday that Q1 China fuel demand would be less than forecast due to lower-than-expected international travel from China.  China's international travel is only 23% of 2019's average since reopening in early January.

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 -9% w/w to 73.62 million bbl in the week ended March 10.

Rising crude demand in India, the world's third-largest crude consumer, is bullish for prices.  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.  

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.  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.  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 10 were +6.9% above the seasonal 5-year average, (2) gasoline inventories were -2.5% below the seasonal 5-year average, and (3) distillate inventories were -7.8% below the 5-year seasonal average.  U.S. crude oil production in the week ended March 10 was unchanged at 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 last Friday that active U.S. oil rigs in the week ended March 10 fell by -2 rigs to an 8-3/4 month low of 590 rigs, moderately below the 2-1/2 year high of 627 rigs posted 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.

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