January WTI crude oil (CLF25) on Friday closed down -0.67 (-0.95%), and January RBOB gasoline (RBF25) closed up +1.84 (+0.95%).
Crude oil prices fell Friday due to concern about the possibility of an all-out US-EU trade war after incoming-President Trump said Friday he would slap tariffs on the EU if it did not conduct large-scale purchases of US oil and gas. There was also concern about weaker US economic growth is there if an extended US government shutdown tied to the inability of Congress so far to pass a stop-gap funding bill before Friday’s midnight deadline.
Crude oil prices have underlying support from a weaker dollar and from a more dovish view of Fed policy after Friday’s weaker-than-expected US PCE price index report. Oil prices also had support from a Reuters that Transneft halted oil pipeline transfers to Belarus and Europe via the Druzhba pipeline due to a technical problem.
Crude has support from Wednesday when Kazakhstan said it intends to comply with OPEC+ quotas and shelved its plans to raise oil production by 190,000 bpd next year.
The outlook for new sanctions on Iranian and Russian crude exports could limit global oil supplies and is bullish for prices. Mike Walz, President-elect Trump’s pick for national security adviser, vowed a return to “maximum pressure” on Iran, and the Biden administration said it is considering new, harsher sanctions on Russian crude oil.
A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -9.9% w/w to 65.28 million bbl in the week ended December 13.
Crude found support earlier this month after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Nov crude production rose +120,000 bpd to 27.02 million bpd.
Escalation of the Ukraine-Russian war is supportive of crude prices. Russia launched a new hypersonic missile into the city of Dnipro late last month, following Ukraine’s expanded use of Western-provided long-range missiles against targets inside Russia. Also, Russian President Putin warned that Russia could strike “decision-making centers” in Kyiv with ballistic missiles. Putin also approved an updated nuclear doctrine that expands the conditions for Russia to use nuclear weapons, including in response to a conventional attack on its soil.
Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China’s Nov apparent oil demand fell -2.14% y/y to 14.013 million bpd, and Jan-Nov apparent oil demand was down -3.26% y/y to 13.996 million bpd. China is the world’s second-largest crude consumer.
A decline in Russian crude exports is supportive of crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -170,000 bpd to 2.97 million bpd in the week to December 15.
Wednesday’s EIA report showed that (1) US crude oil inventories as of December 13 were -5.9% below the seasonal 5-year average, (2) gasoline inventories were -3.3% below the seasonal 5-year average, and (3) distillate inventories were -7.0% below the 5-year seasonal average. US crude oil production in the week ending December 13 fell -0.2% w/w to 13.604 million bpd, falling slightly from the previous week’s record of 13.631 million bpd.
Baker Hughes reported Friday that active US oil rigs in the week ending December 20 were up +1 rig to 483 rigs, modestly above the 2-3/4 year low of 477 rigs posted last month. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
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