January WTI crude oil on Wednesday closed down -0.67 (-0.86%), and Jan RBOB gasoline closed down -0.0122 (-0.55%). Crude oil and gasoline prices Wednesday settled moderately lower after this weekend’s OPEC+ meeting was delayed until Nov 30 as talks ran into trouble amid Saudi dissatisfaction with other members’ oil production levels.  Crude prices were also undercut by a stronger dollar and Wednesday’s weekly EIA report, which showed that crude inventories rose more than expected. Crude prices retreated Wednesday after the OPEC+ meeting scheduled for this weekend was delayed until Nov 30.  Delegates said Saudi Arabia was in difficult talks with Angola and Nigeria, who want higher crude production levels than what the other OPEC+ members will agree to.  The rift among OPEC+ members about production levels reduces the likelihood that the group will extend their crude output cuts or make deeper cuts.

Wednesday’s U.S. economic news was mixed for energy demand and crude prices.  On the negative side, Oct capital goods new orders non defense ex-aircraft, a proxy for capital spending, unexpectedly fell -0.1% m/m, weaker than expectations of +0.1% m/m.  Conversely,  weekly initial unemployment claims fell -24,000 to a 5-week low of 209,000, showing a stronger labor market than expectations of 227,000.  Also, the University of Michigan U.S. Nov consumer sentiment index was revised upward by +0.9 to 61.3, stronger than expectations of 61.0.

Expectations for increased travel in the U.S. over the Thanksgiving holiday are supporting fuel demand and crude prices.  According to the American Automobile Association (AAA) forecast, 55.4 million Americans are expected to travel 50 miles or more from home over the holiday, the third most in records from 2000.

An increase in crude in floating storage is bearish 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 rose +24% w/w to 87.987 million bbl as of Nov 17. Increased crude consumption in India, the world’s third largest crude consumer, is bullish for oil prices after India’s oil product consumption in October rose +3.7% y/y to 19.3 MMT, the highest five months. An increase in Russian crude exports is bearish for oil prices.  Tanker-tracking data monitored by Bloomberg shows 3.2 million bpd of crude was shipped from Russian ports in the four weeks to Nov 12, near the highest in four months.

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.  OPEC Oct crude production was little changed, rising +50,000 bpd to 28.08 million bpd.

Wednesday’s weekly EIA report was mixed for crude and products.  On the bearish side, EIA crude inventories rose +8.7 million bbl, well above expectations of +1.75 million bbl.  Also, EIA gasoline supplies unexpectedly rose +750,000 bbl versus expectations of a -1.1 million bbl draw.  In addition, crude stockpiles at Cushing, the delivery point of WTI futures, rose +858,000 bbl.  On the supportive side, EIA distillate inventories fell -1.02 million bbl to a 1-1/2 year low.

Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of Nov 17 were -0.5% below the seasonal 5-year average, (2) gasoline inventories were -1.4% below the seasonal 5-year average, and (3) distillate inventories were -13.7% below the 5-year seasonal average.  U.S. crude oil production in the week ended Nov 17 was unchanged w/w at a record high of 13.2 million bpd.

Baker Hughes reported Wednesday that active U.S. oil rigs in the week ended Nov 24 were unchanged at 500 rigs, modestly above the 1-3/4 year low of 494 rigs from Nov 10.  The number of U.S. oil rigs has fallen this year after moving sharply higher during 2021-22 from the 18-year pandemic low of 172 rigs posted in Aug 2020 to a 3-1/2 year high of 627 rigs in December 2022.

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