Key Takeaways
- Crude oil and gasoline prices saw modest gains on Thursday, influenced by easing US-China trade tensions and positive inventory data.
- Geopolitical factors, including sanctions on Russian energy producers and Ukrainian attacks on refineries, are contributing to tight Russian crude supplies.
- Global economic indicators, such as stronger-than-expected Eurozone GDP and an improved Japan GDP forecast, are supportive of energy demand.
- OPEC+ is expected to continue with planned production increases, while US crude oil production remains at record highs.
- Despite some bullish factors, gains in crude oil were tempered by a strengthening US dollar index.
Market Performance and Trade Relations
December WTI crude oil futures closed up +0.09 (+0.15%), while December RBOB gasoline futures finished the day with a slight gain of +0.0019 (+0.10%). These modest increases reflect a market sentiment influenced by evolving global economic and geopolitical landscapes.
A significant driver for the energy markets was the easing of US-China trade tensions. Following discussions between President Trump and President Xi Jinping, agreements were made to extend a tariff truce, roll back export controls, and reduce other trade barriers. This development is viewed positively for global economic growth prospects and, consequently, for energy demand.
Inventory Data and Market Support
💡 Yesterday’s weekly EIA crude inventories showed an unexpected decline, and reported gasoline supplies dropped to an 11-month low. This data provided a positive carryover, supporting crude and gasoline prices.
However, the upward momentum for crude oil was somewhat limited by the strengthening US dollar index, which rallied to a 2.5-month high on Thursday. A stronger dollar typically makes oil priced in dollars more expensive for holders of other currencies, potentially dampening demand.
Global Economic Strength and Energy Demand
Global Economic Indicators Bolster Energy Demand
Positive signs from the global economy are providing a bullish undercurrent for energy demand and crude oil prices. Recent data indicates a strengthening economic outlook in key regions.
Eurozone Q3 GDP exceeded expectations, rising by +0.2% quarter-over-quarter and +1.3% year-over-year, surpassing the forecasted +0.1% q/q and +1.2% y/y. Additionally, the Bank of Japan (BOJ) revised its 2025 Japan GDP forecast upward to +0.7% from +0.6%, signaling increased economic optimism.
Geopolitical Factors Impacting Russian Supply
Sanctions and Attacks Strain Russian Oil Exports
Crude oil prices are finding support from anticipated reductions in Russian crude supply in the global market. The United States, through its representative to NATO, has affirmed its commitment to enforcing sanctions on Russian energy. The Trump administration previously announced sanctions on Rosneft PJSC and Lukoil PJSC, Russia’s largest oil producers, citing a lack of commitment to peace in Ukraine.
The European Union has also implemented measures, including a transaction ban on Rosneft and Gazprom Nef. Furthermore, the EU sanctioned 117 additional shadow-fleet vessels and 45 entities assisting Russia in evading sanctions, with 12 of these entities located in China and Hong Kong.
The impact of these geopolitical pressures on Russia’s export capabilities is significant. Ukraine has targeted numerous Russian refineries in recent months, exacerbating domestic fuel shortages and limiting the country’s capacity to export crude oil. Reports indicate that Ukrainian drone and missile attacks on Russian refineries and oil export terminals have reduced Russia’s total seaborne fuel shipments to approximately 1.88 million barrels per day in the first ten days of October, the lowest average in over three years.
Supply Dynamics and Market Outlook
📊 Vortexa reported that crude oil stored on tankers that have remained stationary for at least seven days increased by 12% week-over-week to 89.75 million barrels in the week ending October 24. Meanwhile, the International Energy Agency (IEA) projected a record global oil surplus of 4.0 million barrels per day for 2026.
Bloomberg reported that OPEC+ is expected to focus on a potential third monthly oil production increase of 137,000 barrels per day for December during its upcoming meeting. This figure aligns with market consensus. OPEC+ is currently in the process of boosting output by an additional 1.66 million barrels per day, aiming to fully reverse the 2.2 million barrels per day production cut implemented earlier in 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 two and a half years.
Wednesday’s EIA report highlighted that as of October 24, US crude oil inventories were 5.8% below the seasonal five-year average. Gasoline inventories were 2.7% below the five-year average, and distillate inventories were 8.4% below this average. In contrast, US crude oil production reached a record high of 13.655 million barrels per day in the week ending October 24, an increase of 0.1% week-over-week.
💡 Baker Hughes reported that the number of active US oil rigs increased by two to 420 rigs in the week ending October 24. This figure is modestly above the four-year low of 410 rigs recorded on August 1. Over the past two and a half years, the number of US oil rigs has seen a significant decline from a five-and-a-half-year high of 627 rigs reported in December 2022.
Expert Summary
Energy markets experienced modest gains as global trade tensions eased, and supportive inventory data emerged. Geopolitical events impacting Russian supply and positive economic indicators contributed to market sentiment.
While factors like tightening Russian supply and global demand strength offer support, a rising US dollar presented a headwind for crude oil prices. The market continues to monitor OPEC+ decisions and US production levels.