Crude Oil Rallies on Goldman Call and Stronger China Oil Imports

Sep WTI crude oil (CLU22) on Monday closed up +1.40 (+1.57%), and Sep RBOB gasoline (RBU22) closed +2.17 (+0.76%).

Crude oil and gasoline prices Monday rallied on support from weekend news that China's crude oil imports in July rose to 37.33 million tons from June's 4-year low as transportation activity improved after recent Covid closures.  However, China's crude oil imports still fell -4% y/y.

Crude oil prices Monday also gained support from a mildly weaker dollar and a bullish Goldman Sachs call.  Goldman said it remains bullish on oil prices due to the continued fall in global oil inventories and the lack of demand destruction at current levels.  Nevertheless, Goldman cut its near-term price forecast for Brent crude oil to $110 from $140 per barrel.  Sep Brent crude oil prices on Monday rallied by 1.47% to $96.32 per barrel.

The oil markets continue to assess the odds for a U.S.-Iran nuclear deal after Bloomberg reported that the U.S. and Iran Monday wrapped up 15 months of talks with a draft accord that requires sign-off by the nation's two leaders.  Not all of the outstanding issues between the parties are addressed by the draft accord, and the odds for a deal appear to be slim.  The leaders have only a few weeks to decide whether to enter a final agreement.  An agreement would lead to the return of Iranian oil supplies to the global oil market.

Crude oil prices last week found support after OPEC+ at its meeting last Wednesday said it would boost its crude production target for September by only 100,000 bpd, well below the 600,000 bpd it announced for July and August.  The markets were on guard for a possible larger increase in response to political pressure from the Biden administration.  The added production will most likely be met by Saudi Arabia and the United Arab Emirates, the only members among the 23-nation alliance that have any significant amount of excess production capacity.

OPEC+ production in July rose by +270,000 bpd to 29.050 million bpd but is still running more than 2 million bpd below quotas due to various supply disruptions and capacity constraints.  Nigerian and Libyan crude output has fallen in recent months due to damaged pipelines in Nigeria and political unrest in Libya, undercutting the overall OPEC+ production level.  Crude oil exports from Libya, home to Africa's largest oil reserves, dropped to a 20-month low of 610,000 bpd in June.  However, Libyan Oil Minister Mohammed Oun recently said that Libya's crude production should rise to 1.2 million bpd by early August as oil facilities are brought back on line.

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 +3.1% w/w to 98.08 million bbls in the week ended August 5, recovering farther from the recent 6-month low.

Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of July 29 were -6.8% below the seasonal 5-year average, (2) gasoline inventories were -3.8% below the 5-year average, and (3) distillate inventories were -24.7% below the 5-year average.  U.S. crude oil production in the week ended July 29 was unchanged at its 2-year high of 12.1 million bpd, -1.0 million bpd (-7.6%) 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 Aug 5 fell by -7 rigs to 598 rigs, falling back from the July 29th 2-1/4 year high of 605 rigs.  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.
 

• Crude Oil Sees Support From Stronger China Oil Imports
• Crude Oil Moves Higher on Strong Economic Data
• Crude Oil Rallies on Strong Economic Data
• Crude Closes Lower on Signs of Slowing Global Demand