October WTI crude oil (CLV25) on Friday closed up +0.32 (+0.51%), and October RBOB gasoline (RBV25) closed up +0.0061 (+0.31%).
Crude oil and gasoline prices settled higher on Friday on concerns that a decline in Russian oil exports will curb global oil supplies. The US on Friday proposed that the Group of Seven allies impose tariffs as high as 100% on China and India for their purchases of Russian oil in an effort to convince Russia to end the war in Ukraine. Also, Ukrainian drone attacks have damaged Russian oil infrastructure and may disrupt flows through Russia’s crude-exporting hubs on the Baltic Coast. In addition, Friday’s rally in the S&P 500 to a new record high shows confidence in the economic outlook and is supportive of energy demand and crude prices.
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Crude prices have support on concerns that the ongoing war in Ukraine could lead to additional sanctions on Russian energy exports, reducing global oil supplies. President Trump said Friday that his patience with Russian President Putin was “running out fast” for continuing the war in Ukraine, and he threatened new economic sanctions against Russia.
Reduced Russian crude output is tightening global oil supplies and is supportive of prices. Ukrainian drone and missile attacks on Russian refineries have curbed Russia’s crude-processing runs to 5.09 million bpd in the first 27 days of August, the lowest monthly average in over 3.25 years.
Limiting gains in crude on Friday were a stronger dollar and Friday’s report that showed the University of Michigan US Sep consumer sentiment index fell -2.8 to a 4-month low of 55.4, weaker than expectations of 58.0.
Escalation of geopolitical risks in Europe and the Middle East is bullish for crude prices. Geopolitical tensions in Europe escalated on Wednesday after Poland shot down Russian drones that crossed into its territory in Russia’s latest attacks on Ukraine. Also, Israel on Tuesday launched a strike on Doha, Qatar, targeting the senior leadership of Hamas. Qatar said the attack by Israel violated international law and threatens to widen the conflict in the Middle East, the source of about one-third of global oil supplies.
Crude prices also have support after OPEC+ agreed on Sunday to raise its crude production by 137,000 bpd, starting in October. This is less than the 547,000 bpd increase the group decided to boost output in September and August. OPEC+ also said restarting the remainder of the 1.66 million bpd crude production it had idled will be contingent on “evolving market conditions.”
Concerns about a global oil glut are bearish for crude prices after the International Energy Agency (IEA) on Thursday boosted its 2026 global crude surplus estimate to 3.33 million bpd, +360,000 bpd higher than anticipated in August, citing plans by OPEC+ to revive its crude production.
A bearish factor for crude was Monday’s action by Saudi Arabia to cut prices for all of its crude grades today by $1 a barrel for buyers in Asia for delivery in October, a sign of weak demand for crude and a steeper cut than expectations of a -50 cents per barrel reduction.
An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +6.8% w/w to 77.69 million bbl in the week ended September 5.
Concerns about higher OPEC production are negative for crude prices as OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026. OPEC+ has 1.66 million bpd of production capacity that is due to remain offline until late 2026. OPEC Aug crude production rose by +400,000 bpd to 28.55 million bpd, the highest in over two years.
Wednesday’s EIA report showed that (1) US crude oil inventories as of September 5 were -3.2% below the seasonal 5-year average, (2) gasoline inventories were -0.6% below the seasonal 5-year average, and (3) distillate inventories were -10.4% below the 5-year seasonal average. US crude oil production in the week ending September 5 rose by +0.5% w/w to 13.495 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.
Baker Hughes reported Friday that the number of active US oil rigs in the week ending September 12 rose by +2 to 416 rigs, just above the 4-year low of 410 rigs from August 1. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.
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