Crude oil prices pressure concerns oversupply

WTI crude oil (CLQ25) in August fell -0.27 (-0.40%) today, while RBOB gasoline (RBQ25) in August fell -0.0194 (-0.90%).

Crude oil and gasoline prices are under pressure today, with gasoline lowering for two weeks. The outlook for larger crude oil exports from Iraq could boost global oil supply, and is weighing prices. Expectations for Iraq’s increased crude oil exports will further exacerbate the global oil surplus by urging Saudi Arabia to boost gross exports to maintain its market share. Oil losses show confidence in a bullish economic outlook for energy demand, with today’s rally at the S&P 500, as the dollar is weak.

The weight of crude oil is expected to boost crude exports from the Northern Kurdish region through the Iraqi pipeline, which has stopped oil exports since March 2023. Kurdistan plans to provide 230,000 bpd of crude oil to the Iraqi oil market once exports resume. Iraq is the second largest oil producer in OPEC.

Oil prices have been supported by carryovers since last Friday since the European Union approved new sanctions on Russia’s oil exports and energy trade against the war in Ukraine. The sanctions package includes cutting off 20 more Russian banks from the international payment system Swift, as well as restrictions imposed on sophisticated Russian oil in other countries. A large Indian oil refinery owned by Russia’s Rosneft PJSC has also been blacklisted. Additionally, 105 more ships from the Russian Shadow Fleet have been approved, with a total of over 400 ships.

Concerns about global oil overloads are negative about gross prices. On July 5, OPEC+ agreed to increase crude oil production at 548,000 barrels per day (BPD) from August 1, exceeding expectations of an increase of 411,000 bpd. Saudi Arabia also said there could be a continued increase in the size of additional crude production, which is seen as a strategy to lower crude oil prices and impose penalties that would over-produce OPEC+ members such as Kazakhstan and Iraq. OPEC+ increased production volume to reverse two years of production cuts, gradually recovering a total of 2.2 million bpd production by September 2026. On May 31, OPEC+ agreed to an increase of 411,000 bpd in crude production in July, following the same 411,000 bpd hike in June. Crude oil production in June was +360,000 bpd, reaching a 1.5-year high of 28.1 million bpd.

In support of oil prices, Bloomberg reported on July 10 that it was discussing a further suspension of production increases from October, following the next monthly hike in September of 548,000 barrels. OPEC+ may be worried about a slowdown in global oil demand later this year, and if the group continues to boost production, it could lead to oversupply. The International Energy Agency said inventory is accumulating at a rate of 1 million bpd and the global crude oil market is facing a fourth quarter equivalent of surplus, which is equivalent to 1.5% of global crude consumption.

The decline in crude oil held worldwide in tankers is bullish for oil prices. Vortexa today reported that it was stored in a tanker that was still in a tanker that had been stationary for at least seven days in the week that ended July 18th.

Last Wednesday’s weekly EIA report showed that US crude stocks fell by 3.859 million barrels for the week that ended July 11th, their first draw in three weeks. Petrol inventory rose at +3.399 million barrels, while distilled inventory rose at +4.173 million barrels. The EIA report showed that (1) US crude oil inventory as of July 11 was -8.0% below the seasonal five-year average, (2) gasoline inventory was -0.1% below the seasonal five-year average, and (3) distilled inventory was -21.1% below the five-year seasonal average. US crude oil production for the week ending July 11th fell from -0.1% w/w to 13.375 million bpd.

Baker Hughes reported last Friday that the number of active US oil equipment for the week ending July 18 was reduced by -2 rigs to a new 3.75-year low on 422 rigs. Over the past two. Over the past five years, the number of oil rigs in the US fell sharply from the 5.25 highs of 627 rigs reported in December 2022.

On the date of publication, Rich Asplund had no position (directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published barchart.com

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