January WTI crude oil (CLF26) on Monday closed up +0.51 (+0.91%), and January RBOB gasoline (RBF26) closed up +0.0340 (+1.99%).
Crude oil on Monday rallied on geopolitical risks in Venezuela and Ukraine-Russia. Other bullish factors included the weaker dollar and the stronger stock market. Crude prices had carry-over support from last Friday's news from Baker Hughes that active US oil rigs fell to a 4.25-year low, which implies reduced US crude oil production.
The Venezuelan situation is supportive of crude prices. President Trump last week ordered a "total and complete blockade of all sanctioned oil tankers" going into and leaving Venezuela. The US Coast Guard on Saturday boarded the non-sanctioned Centuries tanker in the Caribbean. Also, US forces are in pursuit of tanker Bella 1, which is on its way to Venezuela.
Oil prices also have support after Ukraine hit a Russian shadow oil tanker in the Mediterranean Sea with drones for the first time.
Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -7% w/w to 107.15 million bbl in the week ended December 19.
Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past three months, limiting Russia's crude oil export capabilities and reducing global oil supplies. Also, since the end of November, Ukraine has ramped up attacks on Russian tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. In addition, new US and EU sanctions on Russian oil companies, infrastructure, and tankers have curbed Russian oil exports.
Crude also garnered support after OPEC+ on November 30 said it would stick to plans to pause production increases in Q1 of 2026. 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 November crude production fell by -10,000 bpd to 29.09 million bpd.
Last month, OPEC 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 the previous 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.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of December 12 were -4.0% below the seasonal 5-year average, (2) gasoline inventories were -0.4% below the seasonal 5-year average, and (3) distillate inventories were -5.7% below the 5-year seasonal average. US crude oil production in the week ending December 12 fell -0.1% w/w to 13.843 million bpd, just below the record high of 13.862 million bpd from the week of November 7.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ended December 19 fell by -8 to a 4.25-year low of 406 rigs. 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.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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