December WTI crude oil (CLZ25) on Tuesday closed up +0.83 (+1.39%), and December RBOB gasoline (RBZ25) closed up +0.0092 (+0.46%).
Crude oil prices recovered from early losses on Tuesday and moved higher after hawkish rhetoric by the European Union’s top diplomat raised expectations that sanctions on Russian energy supplies will tighten. Crude prices initially retreated on Tuesday after a selloff in the S&P 500 to a 1-month low sparked risk-off sentiment in asset markets. Also, signs of weakness in the US labor market are negative for economic growth and energy demand, after ADP reported that US employers shed an average of 2,500 jobs per week in the four weeks ended November 1.
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Crude prices rose on Tuesday after comments from Kaja Kallas, the EU’s top diplomat, bolstered speculation that the EU will tighten sanctions on Russian energy when she said that Russia’s recent aggression against the EU, including an explosion in Poland, should be considered terrorism.
Oil prices have support from news of reduced crude exports from Russia, after Bloomberg data showed Russia shipped 3.36 million bpd of crude in the four weeks to November 16, down 90,000 bpd from the prior week and the lowest in 3 months. Ukraine has targeted at least 28 Russian refineries over the past three months, exacerbating a fuel crunch in Russia and limiting Russia’s crude export capabilities. Ukraine has knocked out 13% to 20% of Russia’s refining capacity by the end of October, curbing production by as much as 1.1 million bpd. New US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.
Strength in the crude crack spread is bullish for crude, as the spread rose to a 19-month high on Tuesday, encouraging refiners to boost crude purchases and refine it into gasoline and distillates.
Oil prices have underlying support from continued geopolitical risks related to Russia, last Friday’s seizure by Iran of an oil tanker in the Gulf of Oman, and the US military buildup for a possible attack on Venezuela, which is the world’s 12th-largest oil producer.
OPEC last Wednesday revised its Q3 global oil market estimates from a deficit to a surplus, as US production exceeded expectations and OPEC also ramped up crude output. OPEC said it now sees a 500,000 bpd surplus in global oil markets in Q3, versus last month’s estimate for a -400,000 bpd deficit. Also, the EIA raised its 2025 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month.
OPEC+ at its November 2 meeting announced that members will raise production by +137,000 bpd in December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. The IEA in mid-October forecasted a record global oil surplus of 4.0 million bpd for 2026. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC’s October crude production rose by +50,000 bpd to 29.07 million bpd, the highest in 2.5 years.
Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose +1.1% w/w to 103.41 million bbls in the week ended November 14, the highest level since June 2024.
The consensus is that Wednesday’s weekly EIA crude inventories will decline by -2.0 million bbl, and gasoline supplies will fall by -1.0 million bbl.
Last Thursday’s EIA report showed that (1) US crude oil inventories as of November 7 were -4.1% below the seasonal 5-year average, (2) gasoline inventories were -4.0% below the seasonal 5-year average, and (3) distillate inventories were -7.9% below the 5-year seasonal average. US crude oil production in the week ending November 7 rose +1.5% w/w to a record high of 13.862 million bpd.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ending November 14 rose by +3 rigs to 417, modestly above the 4-year low of 410 rigs set on August 1. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.
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