June WTI crude oil on Friday closed up +0.50, and June gasoline closed up +1.53.

Crude oil and gasoline prices Friday closed moderately higher.  Crude prices found support from Friday’s news that U.S. Apr manufacturing activity unexpectedly expanded by the most in 6 months, a positive factor for energy demand.  Gains were limited after a gauge of Eurozone manufacturing activity unexpectedly contracted by the most in nearly three years.

Friday’s global reports on manufacturing activity were mixed for crude prices.  On the bullish side, the U.S. Apr S&P manufacturing PMI unexpectedly rose +1.2 to 50.4, stronger than expectations of a decline to 49.0 and its strongest pace of expansion in 6 months.  Also, the Japan Apr Jibun Bank manufacturing PMI rose +0.3 to a 6-month high of 49.5.  On the bearish side, the Eurozone Apr S&P manufacturing PMI unexpectedly fell -1.8 to 45.5, weaker than expectations of an increase to 48.0 and the weakest report in nearly three years.

Weakness in the crude crack spread is bearish for oil prices.  Friday’s crack spread fell to a 2-month low, discouraging refiners from purchasing crude to refine into gasoline and distillates.

Signs of weakness in global diesel demand signal an economic slowdown that is bearish for crude prices.  According to data tracked by China’s Ministry of Transport, the number of trucks running on Chinese highways fell -8% w/w in the week ended April 9.  Also, U.S. diesel demand is on track to contract -2% this year, according to S&P Global, which would be the biggest drop in U.S. diesel demand in 7 years, not counting the 2020 pandemic year.

In a bullish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week fell -17% w/w to 95.6 million bbl in the week ended April 14.

Strength in Chinese crude demand is bullish for prices.  China’s General Administration of Customs reported last Thursday that China’s Mar crude imports rose +16% m/m to 52.31 MMT (12.37 million bpd), the highest level since June 2020.  China’s crude imports year-to-date are up +6.7% y/y at 136.369 MMT.

The ongoing halt of Iraqi crude exports from the Turkish port of Ceyhan is tightening global oil supplies and is bullish for crude prices.  The Turkish government said it wants to negotiate a $1.5 billion settlement that it has been ordered to pay before allowing Iraqi crude exports to resume through its pipeline.  Oil exports of 400,000 bpd from the Turkish port of Ceyhan have been halted since March 25 after Iraq won an arbitration case from the International Chamber of Commerce that said Turkey violated a 1973 pipeline transit agreement by allowing crude from the Kurdish region to be exported without Iraqi government consent.

Crude prices surged on April 3 after OPEC+ announced a surprise oil production cut of more than 1 million bpd starting May 1.  Saudi Arabia said the cuts were a “precautionary measure aimed at supporting the stability of the oil market.”  OPEC Mar crude production fell by -80,000 bpd to 29.16 million bpd.

Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of April 14 were +1.6% above the seasonal 5-year average, (2) gasoline inventories were -6.3% below the seasonal 5-year average, and (3) distillate inventories were -11.6% below the 5-year seasonal average.  U.S. crude oil production in the week ended April 14 was unchanged w/w at 12.3 million bpd, only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported Friday that active U.S. oil rigs in the week ended April 21 rose by +3 rigs to 591 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2.  U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.

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