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Key Takeaways
- November WTI crude oil and RBOB gasoline futures settled higher on Friday, recovering from earlier losses.
- Crude oil prices were supported by easing US-China trade tensions, while gasoline saw gains due to supply disruptions at a BP refinery.
- Geopolitical factors, including potential sanctions on Russian oil and developments in the Middle East, continue to influence crude prices.
- Global supply dynamics, such as inventory levels and OPEC+ production adjustments, are also key drivers for oil markets.
November WTI crude oil futures (CLX25) closed up +0.08 (+0.14%) on Friday. Concurrently, November RBOB gasoline futures (RBX25) finished the day higher by +0.0260 (+1.44%).
Both crude oil and gasoline benchmarks demonstrated a recovery from earlier trading lows on Friday, ultimately settling the session with gains. Crude oil prices found support stemming from a reduction in US-China trade tensions, a development that typically bolters prospects for global economic growth and, consequently, energy demand. President Trump indicated on Friday that current tariffs on China are not sustainable and confirmed plans to meet with Chinese President Xi Jinping later this month in South Korea.
💡 This easing of trade friction is a positive signal for the global economic outlook, which is closely tied to energy consumption.
Gasoline prices also experienced a notable jump on Friday, driven by supply concerns following a fire at BP’s refinery in Whiting, Indiana. The incident led to reduced production rates at the facility, which is the largest inland refinery in the United States, capable of processing 435,000 barrels per day.
📍 Understanding refinery disruptions is crucial for gasoline traders as it directly impacts available supply and regional price movements.
Earlier in Friday’s trading, crude oil had touched a 5.25-month low, and gasoline slid to its lowest nearest-futures price in 4.5 years. The recovery in the dollar index from a 1.5-week low to finish higher on the day acted as a headwind for crude prices. Crude oil also faced pressure from negative carryover sentiment from Thursday, when President Trump’s announcement of a potential meeting with Russian President Putin to discuss ending the war in Ukraine raised the possibility of increased Russian oil supply entering the market.
✅ The interplay between currency movements and commodity prices is a fundamental aspect of market dynamics.
Furthermore, crude oil sentiment is being weighed down by concerns over a global supply glut. The International Energy Agency (IEA) forecast on Tuesday that a record global oil surplus of 4.0 million barrels per day could emerge by 2026.
📊 This long-term surplus forecast suggests continued downward pressure on prices if demand growth falters or supply continues to rise.
Cooling tensions in the Middle East have also contributed to a reduction in the risk premium embedded in crude prices. This easing of geopolitical risk lessens the perceived likelihood of supply disruptions from the region, particularly following the agreement between Israel and Hamas.
⚡ Geopolitical events and their perceived impact on supply security remain a critical, albeit variable, factor in oil price discovery.
An increase in crude oil held globally on tankers presents a bearish signal for oil prices. Vortexa reported on Monday that crude oil stored on vessels stationary for at least seven days rose by 8.9% week-over-week to 93.96 million barrels in the week ending October 10.
Crude prices found some support after OPEC+ agreed on October 5 to a 137,000 barrels per day increase in its crude production target, effective November. This increase was notably less than market expectations, which had anticipated a potential boost of around 500,000 barrels per day. OPEC+ is currently in the process of increasing output by an additional 1.66 million barrels per day, aiming to fully reverse the 2.2 million barrels per day production cut implemented in early 2024. OPEC’s crude production in September rose by 400,000 barrels per day to 29.05 million barrels per day, reaching its highest level in 2.5 years.
📌 While OPEC+ is increasing output, the measured approach suggests a focus on market stability rather than aggressive production hikes.
Reduced crude oil exports from Russia are providing supportive sentiment for oil prices. Ukraine has targeted at least 28 Russian refineries over the past two months, intensifying a fuel crunch within Russia and constraining the country’s crude export capabilities. Ukrainian drone and missile attacks on Russian refineries and oil export terminals have curbed Russia’s total seaborne fuel shipments to an average of 1.88 million barrels per day in the first ten days of October, marking the lowest average in over 3.25 years.
The outlook for higher crude production in Iraq is expected to add to global oil supplies, which is generally bearish for crude prices. Iraq recently announced an agreement with the regional government of Kurdistan to resume oil exports from the Kurdish region via a pipeline to Turkey. These exports had been halted for the past two years due to a payment dispute. Iraq’s Foreign Minister Hussein stated that the resumption of crude exports could introduce 500,000 barrels per day of new oil supplies to global markets.
💡 Resumed exports from Iraq signify a potential return of significant supply, which could offset some upward price pressures.
Crude prices are also receiving support from concerns that the ongoing war in Ukraine could trigger additional sanctions on Russian energy exports, thereby reducing global oil supplies. The United States has proposed that G7 allies impose tariffs as high as 100% on China and India for their purchases of Russian oil, an effort aimed at pressuring Russia to end the conflict in Ukraine.
Thursday’s Energy Information Administration (EIA) report indicated the following for the week ending October 10: US crude oil inventories were 3.4% below the seasonal 5-year average; gasoline inventories were 0.1% above the seasonal 5-year average; and distillate inventories were 6.9% below the seasonal 5-year average. Notably, US crude oil production in the same week rose by 0.1% week-over-week to a record 13.636 million barrels per day.
Baker Hughes reported on Friday that the number of active US oil rigs remained unchanged at 418 rigs for the week ending October 17. This figure is modestly above the 4-year low of 410 rigs recorded on August 1. Over the past 2.5 years, the number of active US oil rigs has fallen significantly from a 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.
Fundfa Insight
This analysis highlights the complex interplay of factors influencing crude oil and gasoline markets. While geopolitical tensions and supply disruptions can provide price support, broader concerns about global demand, potential supply increases from OPEC+ and Iraq, and historical inventory levels continue to exert downward pressure. Traders are closely watching trade relations, refinery operations, and production policies to navigate these dynamic markets.
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