December WTI crude oil on Tuesday closed down -1.75 (-2.05%), and Dec RBOB gasoline closed down -5.89 (-2.55%). Nov WTI crude oil and gasoline prices Tuesday settled moderately lower and posted 1-week lows.  A stronger dollar Tuesday weighed on crude prices.  Crude oil prices were also undercut as Israel continued to delay an expected ground assault on Gaza.

Diplomatic efforts to release hostages taken by Hamas could further delay or even prompt Israel not to invade Gaza, potentially keeping the Israeli-Hamas war contained.  French President Macron called for an international coalition to fight Hamas and warned other Iranian-backed militant groups not to open new fronts in the Israeli-Hamas war as he met with Prime Minister Netanyahu Tuesday in Israel.  Western countries have intensified efforts to stop the Israeli-Has war from spreading, with EU leaders endorsing a call by the United Nations for a “humanitarian pause” in the war.

An increase in Russian crude exports is bearish for oil prices.  Tanker-tracking data monitored by Bloomberg shows 3.53 million bpd of crude was shipped from Russian ports in the week ended Oct 22, an increase of 20,000 bpd from the previous week.

Concerns about weakness in global energy demand are negative for crude prices after Bloomberg reported that ECB President Lagarde told the presidents of the European Commission, the European Council, and the Eurogroup that the Eurozone economy faces stagnation for the next few quarters. In a bearish factor for crude oil, the U.S. last Wednesday said it would ease sanctions for six months on Venezuela’s oil exports in exchange for steps to ensure the country holds fair presidential elections next year.  An easing of sanctions would put additional crude supplies on the global market, with some analysts estimating about 200,000 bpd of additional supplies.

The tightness in the oil market is expected to continue due to the extension of OPEC+ production cuts.  Saudi Arabia recently said it would maintain its unilateral crude production cut of 1.0 million bpd through December.  The move will hold Saudi Arabia’s crude output at about 9 million bpd, the lowest level in three years.  Russia also recently announced that it would maintain its 300,000 bpd cut in crude production through December.   Saudi Arabia and Russia on Wednesday announced that they will retain their crude production cuts until the end of the year.   OPEC Sep crude production was little changed, rising +50,000 bpd to 27.97 million bpd.

A decline in crude in floating storage is bullish for prices.  Monday’s weekly data from Vortexa showed that the amount of crude oil held worldwide on tankers that have been stationary for at least a week fell -11% w/w to 63.54 million bbl as of Oct 20, the lowest in 3-1/2 years.

The consensus is that Wednesday’s weekly EIA crude inventories will fall by -450,000 bbl. Last Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of Oct 13 were -4.8% below the seasonal 5-year average, (2) gasoline inventories were -0.1% below the seasonal 5-year average, and (3) distillate inventories were -13.3% below the 5-year seasonal average.  U.S. crude oil production in the week ended Oct 13 was unchanged  w/w at a record high of 13.2 million bpd.

Baker Hughes reported last Friday that active U.S. oil rigs in the week ended Oct 13 rose by +4 to 501 rigs, recovering slightly from the prior week’s 20-month low of 497 rigs.  That is well below the 3-1/4 year high of 627 rigs posted on Dec 2, 2022.  Still, U.S. active oil rigs have roughly tripled from the 18-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity from pandemic lows.

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