Crude Oil Recovers from Early Losses on Dollar Weakness

April WTI crude oil (CLJ23) on Monday closed up +0.90 (+1.35%), and Apr RBOB gasoline (RBJ23) closed up +3.35 (+1.38%).

Crude oil and gasoline prices Monday posted moderate gains.  Crude oil Monday recovered from a 15-1/2 month low and posted moderate gains after a decline in the dollar index (DXY00) to a 15-1/2 month low sparked some short covering in crude futures.  Crude prices Monday initially moved lower on concern that the U.S. and European banking turmoil could push the global economy into a recession that reduces energy demand.

In a bearish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +2.6% w/w to 82.71 million bbl in the week ended March 17.

Goldman Sachs Monday cut its 12-month crude price forecast for Brent crude to $94 a barrel from a previous forecast of $100 a barrel, citing "banking stress, recession fears, and an exodus of investor flows."  Goldman now predicts that OPEC+ will start to reverse its supply cuts, currently at about 2 million bpd, in Q3 of 2024 versus a prior forecast of the second half of 2023.

A bearish factor for crude was last 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.

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.   OPEC crude production in February rose by +120,000 bpd to 29.24 million bpd.

Last 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 17 fell by -1 rig to a 9-month low of 589 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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