December WTI crude oil (CLZ25) on Friday closed up +0.41 (+0.68%), and December RBOB gasoline (RBZ25) closed up +0.0082 (+0.43%).
Crude oil and gasoline prices moved higher on Friday, with gasoline posting a 1-month high. Crude prices rose on Friday on reports that the US plans military strikes on OPEC producer Venezuela. Crude also has carryover support from Thursday, when President Trump and President Xi Jinping agreed to extend a tariff truce, which is supportive for economic growth and energy demand.
Friday's rally in the dollar index (DXY00) to a 2.75-month high limited gains in crude. Also, concerns about energy demand in China, the world's largest crude importer, are bearish for oil prices after Friday's news showed that China Oct manufacturing PMI fell -0.8 to 49.0, weaker than expectations of 49.6 and the steepest pace of contraction in 6 months.
Crude prices found support on Friday after the Miami Herald and the Wall Street Journal reported that the US has selected targets in Venezuela, including military facilities, that it may strike as part of its counter-narcotics campaign. Any attack on Venezuela could disrupt the country's crude supplies.
Crude oil has support on expectations for a decline in Russian crude supplies in the global market after the US representative to NATO said, "We have implemented sanctions on Russian energy and we plan to enforce them." The Trump administration last Wednesday announced sanctions on Rosneft PJSC and Lukoil PJSC, Russia's biggest oil producers, due to "Russia's lack of serious commitment to a peace process to end the war in Ukraine." Meanwhile, the EU adopted a transaction ban on Rosneft and Gazprom Nef and sanctioned 117 additional shadow-fleet vessels and 45 entities that have helped Russia evade sanctions, including 12 companies in China and Hong Kong.
Reduced crude exports from Russia are supportive of oil prices. Ukraine has targeted at least 28 Russian refineries over the past two months, exacerbating a fuel crunch in Russia and limiting Russia's crude export capabilities. Ukrainian drone and missile attacks on Russian refineries and oil export terminals curbed Russia's total seaborne fuel shipments to 1.88 million bpd in the first ten days of October, the lowest average in over 3.25 years.
Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days rose by +12% w/w to 89.75 million bbls in the week ended October 24. Notably, the IEA forecasted a record global oil surplus of 4.0 million bpd for 2026 on October 14.
Bloomberg reported on Monday that OPEC+ will, at its meeting this weekend, focus on a base case of a third monthly oil production hike of 137,000 bpd for December. That would be in line with the market consensus. OPEC+ is in the midst of boosting output by a further 1.66 million bpd to fully reverse the 2.2 million bpd production cut seen in early 2024. OPEC's September crude production rose by +400,000 bpd to 29.05 million bpd, the highest in 2.5 years.
Wednesday's EIA report showed that (1) US crude oil inventories as of October 24 were -5.8% below the seasonal 5-year average, (2) gasoline inventories were -2.7% below the seasonal 5-year average, and (3) distillate inventories were -8.4% below the 5-year seasonal average. US crude oil production in the week ending October 24 rose +0.1% w/w to a record high of 13.655 million bpd.
Baker Hughes reported Friday that the number of active US oil rigs in the week ending October 31 fell by -6 rigs to 414 rigs, modestly above the 4-year low of 410 rigs from 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.
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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