October WTI crude oil (CLV25) on Thursday closed up +0.45 (+0.70%), and October RBOB gasoline (RBV25) closed up +0.0220 (+1.12%).
Crude oil and gasoline prices recovered from early losses on Thursday and settled higher as short covering emerged following German Chancellor Merz’s statement that a meeting between Russian President Putin and Ukrainian President Zelensky is unlikely to materialize. Thursday’s weaker dollar was also supportive of crude prices, as was a rally in the S&P 500 to a new record high, which shows confidence in the economic outlook that is bullish for energy demand.
Crude prices rallied on Thursday after German Chancellor Merz said a meeting between Russian President Putin and Ukrainian President Zelensky was unlikely to happen, which could prompt President Trump to ramp up secondary sanctions on Russian energy exports, thereby tightening global supplies. On Tuesday, President Trump warned of “an economic war” on Russia if it does not seek to end the war.
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 +11% w/w to 96.77 million bbl in the week ended August 22.
Concerns about higher OPEC production are negative for crude prices after OPEC+ on August 2 endorsed an additional 547,000 bpd increase in its crude production for September 1. 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 supplies that are currently due to remain offline until late 2026. OPEC+ will meet again on September 7. OPEC July crude production fell by -20,000 bpd to 28.31 million bpd.
Wednesday’s weekly EIA report showed that (1) US crude oil inventories as of August 22 were -5.2% below the seasonal 5-year average, (2) gasoline inventories were -0.3% below the seasonal 5-year average, and (3) distillate inventories were -14.8% below the 5-year seasonal average. US crude oil production in the week ending August 22 rose by +0.4% w/w to 13.439 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.
