Crude Posts Moderate Losses as Iran Is Said to Ease Tensions

Nov WTI crude oil (CLX24) Monday closed down -0.63 (-0.89%), and Nov RBOB gasoline (RBX24) closed down -3.97 (-1.98%).

Crude oil and gasoline prices Monday gave up early gains and finished moderately lower.  The strength of the dollar on Monday was negative for energy prices.  Also, signs of weakness in US and European manufacturing activity are bearish for fuel demand and oil prices.   Crude prices extended their losses Monday after comments from Iranian President Masoud Pezeshkian eased concerns of escalation of Middle East hostilities when he said his country is prepared to de-escalate tensions as long as it sees the same level of commitment on the other side.

Crude on Monday initially climbed to a 2-1/2 week high today after China boosted stimulus and on concerns that conflict in the Middle East will widen and threaten the region's oil supplies.  

Monday's global economic news was weaker than expected and was bearish for energy demand and crude prices.  The US Sep S&P manufacturing PMI unexpectedly fell -0.9 to 47.0, weaker than expectations of 48.6 and the steepest pace of contraction in 15 months.  Also, the Eurozone Sep S&P manufacturing PMI fell -1.0 to 44.8, weaker than expectations of 45.7 and the steepest pace of contraction in 9 months.  In addition, the Eurozone Sep S&P composite PMI fell -2.1 to 48.9, weaker than expectations of 50.5 and the steepest pace of contraction in  8 months.

Sunday's action by China to boost stimulus may spur economic growth that supports energy demand and is bullish for crude prices after the PBOC cut the 14-day reverse repo rate by -10 bp to 1.85% from 1.95%.

Concerns that conflict in the Middle East may widen and disrupt the region's crude supplies are bullish for crude.  Iranian-backed Hezbollah launched a barrage of rockets, missiles, and drones toward northern Israel on Sunday, and Israeli counterattacks Monday in Lebanon killed more than 180 people, raising fears about a broader conflict that could involve Iran, a major oil producer.

A decline in crude oil held worldwide on tankers is bullish for prices.  Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -12% w/w to 56.31 million bbl in the week ended September 20, the lowest amount in 4-1/2 years.

Crude exports from Libya have recently risen, which boosts global supplies and is negative for prices.  Tanker-tracking data compiled by Bloomberg showed Libya's crude shipments averaged 719,000 bpd between September 13-19, more than double the 314,000 bpd in the previous seven days.   Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.

Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand.  

An increase in Russian crude exports is negative for crude.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +110,000 bpd to 3.25 million bpd in the week to September 15.  Meanwhile, a decline in Russian crude production is positive for oil prices after Russia's Energy Ministry reported last Tuesday that Russia's Aug crude production was 9.059 million bpd, down -30,000 bpd from July but +81,000 bpd above the output target it agreed to with OPEC+.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of September 13 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were -0.5% below the seasonal 5-year average, and (3) distillate inventories were -8.6% below the 5-year seasonal average.  US crude oil production in the week ending September 13 fell -0.8% w/w to 13.2 million bpd, just below the record high of 13.4 million bpd from the week of August 16.

Baker Hughes reported last Friday that active US oil rigs in the week ending September 20 were unchanged at 488 rigs, modestly above the 2-1/2 year low of 477 rigs posted in the week ending July 19.  The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.
 

• Crude Gives Up Early Gains on Global Fuel Demand Concerns
• Crude Pressured by Dollar Strength and Increased Libyan Crude Exports
• Crude Prices Underpinned by Heightened Middle East Tensions
• Risk-On Sentiment in Asset Markets and Middle East Tensions Boost Crude Prices

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