Key Takeaways
- Crude oil and gasoline futures saw slight declines on Monday, with WTI crude reaching a 5.5-month low.
- A stronger US dollar and potential for increased Russian oil supply weighed on crude prices.
- Easing US-China trade tensions and positive Chinese economic data provided some support for energy demand.
- Concerns about a global oil supply glut and cooling Middle East tensions contributed to downward pressure on prices.
- Reduced crude oil stored on tankers and OPEC+’s moderating production increase offered some bullish support.
Market Performance and Influencing Factors
November WTI crude oil futures closed Monday down 0.02% to $78.16 per barrel, while November RBOB gasoline futures settled lower by 0.41% at $2.0762 per gallon. Crude oil experienced a 5.5-month low, influenced by several key market drivers.
⚡ A strengthening US dollar acted as aheadwind for crude oil prices. Additionally, comments from President Trump regarding a potential meeting with Russian President Putin to discuss the war in Ukraine raised expectations of increased Russian oil supply, further pressuring crude.
💡 Losses in crude were somewhat contained due to a de-escalation of US-China trade tensions. President Trump’s statement on Sunday that relations with China would be fine bolstered prospects for global economic growth and, consequently, energy demand.
📊 Stronger-than-expected economic data from China also provided support for crude prices. China’s Q3 GDP growth exceeded forecasts, rising by 1.1% quarter-over-quarter and 4.8% year-over-year. Furthermore, China’s September industrial production increased by 6.5% year-over-year, surpassing the expected 5.0% growth.
Global Supply and Demand Dynamics
A significant bearish factor for crude prices remains the concern over a global supply glut. The International Energy Agency (IEA) recently forecast a substantial global oil surplus of 4.0 million barrels per day for 2026.
📍 Cooling tensions in the Middle East have diminished the risk premium associated with crude oil. The ceasefire agreement between Israel and Hamas has reduced the likelihood of disruptions to oil supplies from the region.
⚡ A bullish indicator for oil prices has been the decrease in crude oil stored on tankers. Vortexa reported that crude oil held on stationary tankers for at least seven days fell by 12% week-over-week to 78.44 million barrels in the week ending October 17.
OPEC+ and Geopolitical Influences
Crude prices found some support following OPEC+’s decision on October 5 to increase its crude production target by 137,000 barrels per day, effective November. This increase was below market expectations for a potential 500,000 bpd boost.
OPEC+ is currently in the process of increasing output by an additional 1.66 million bpd, aiming to fully reverse the 2.2 million bpd production cut implemented in early 2024. In September, OPEC’s crude production rose by 400,000 bpd to 29.05 million bpd, marking a 2.5-year high.
⚡ Reduced crude exports from Russia are lending support to oil prices. Ukraine has targeted numerous Russian refineries over the past two months, contributing to a fuel crunch within Russia and limiting its crude export capabilities. Ukrainian drone and missile attacks have curbed Russia’s total seaborne fuel shipments to an average of 1.88 million bpd in the first ten days of October, the lowest in over 3.25 years.
Regional Production and Supply Outlook
💡 The anticipated increase in crude production from Iraq is expected to boost global oil supplies, which presents a bearish outlook for crude prices. Iraq recently announced an agreement with the Kurdistan regional government to resume oil exports from the Kurdish region. These exports, halted for two years due to a payment dispute, will flow through a pipeline to Turkey.
Iraqi Foreign Minister Hussein indicated that the resumption of crude exports could add 500,000 bpd of new oil supply to global markets.
⚡ Concerns that the ongoing war in Ukraine could lead to further sanctions on Russian energy exports, thereby reducing global oil supplies, provide support for crude prices. The US has proposed that G7 allies impose tariffs as high as 100% on Chinese and Indian purchases of Russian oil in an effort to pressure Russia to end the conflict.
US Inventory Data and Rig Count
The EIA report from last Thursday indicated that as of October 10, US crude oil inventories were 3.4% below the seasonal 5-year average. Gasoline inventories were 0.1% above the seasonal average, while distillate inventories were 6.9% below the 5-year seasonal average.
📊 US crude oil production increased by 0.1% week-over-week to a record 13.636 million bpd in the week ending October 10.
📍 Baker Hughes reported on Friday that the number of active US oil rigs remained unchanged at 418 rigs in the week ending October 17. This figure is slightly above the 4-year low of 410 rigs reported on August 1. Over the past 2.5 years, the number of US oil rigs has significantly decreased from a 5.5-year high of 627 rigs recorded in December 2022.
Final Thoughts
Crude oil and gasoline prices experienced minor declines, with WTI crude hitting multi-month lows. Market sentiment was influenced by a stronger dollar, geopolitical developments, and evolving global supply-demand balances. While concerns over a supply glut and specific regional production increases exert downward pressure, factors like reduced tanker storage and OPEC+’s measured output adjustments offer some price support.