June WTI crude oil on Wednesday closed down -3.06, and June RBOB gasoline closed down -11.36 (-4.66%).

Crude oil and gasoline prices Wednesday fell sharply for a second session, with crude posting a 5-week low and gasoline posting a 2-1/4 month low.  Crude prices are under pressure on concern a slowdown in the global economy would curb energy demand.  Crude prices are also falling on concern that tighter monetary policy from the world’s central banks will slow economic growth and energy demand.  The Fed raised interest rates by 25 bp Wednesday, and the ECB is expected to raise rates by +25 bp on Thursday.  Crude prices maintained sharp losses following this Wednesday’s mixed EIA inventory report.

Wednesday’s global economic news was stronger than expected and was bullish for energy demand and crude prices.  The U.S. Apr ADP employment change rose +296,000, stronger than expectations of +150,000 and the biggest increase in 9 months.  Also, the U.S. Apr ISM services index rose +0.7 to 51.9, stronger than expectations of 51.8.  In addition, the Eurozone Mar unemployment rate unexpectedly fell -0.1 to a record low of 6.5%, showing a stronger labor market than expectations of no change at 6.6%.

Crude oil prices are also being undercut by signs that Russia has not delivered on its threat to cut crude output.  Tanker-tracking data from Bloomberg shows Russia’s crude exports jumped above 4 million bpd in the week of April 28.  Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.

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 -7.2% w/w to 88.87 million bbl in the week ended April 28.

Strength in energy demand in India, the world’s third largest crude consumer, is bullish for prices after India’s Ministry of Petroleum and Natural Gas reported India’s Mar crude processing rose +3.1% y/y to 23 MMT.  Also, India’s Mar crude imports rose +7.9% y/y to 20.5 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 weekly EIA inventory report was mixed for crude and products.  On the bearish side, EIA gasoline supplies unexpectedly rose +1.74 million bbl versus expectations of a -1.5 million bbl draw.  Also, crude stockpiles at Cushing, the delivery point of WTI futures, rose +541,000 bbl.  On the bullish side, EIA crude inventories fell -1.28 million bbl, a larger draw than expectations of -500,000 bbl.  Also, distillate supplies fell 1.19 million bbl to a 5-month low, a bigger draw than expectations of -800,000 bbl.

Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of April 28 were -1.9% below the seasonal 5-year average, (2) gasoline inventories were -6.2% below the seasonal 5-year average, and (3) distillate inventories were -12.5% below the 5-year seasonal average.  U.S. crude oil production in the week ended April 28 rose +0.8% w/w to 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 last Friday that active U.S. oil rigs in the week ended April 28 were unchanged at 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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