February WTI crude oil (CLG25) Friday closed up +2.65 (+3.58%), and February RBOB gasoline (RBG25) closed up +0.0466 (+2.30%).
Crude and gasoline prices Friday settled sharply higher, with crude posting a 3-month high and gasoline posting a 2-3/4 month high. Crude rallied Friday after the US ratcheted up sanctions against Russian crude oil. Also, Friday's stronger-than-expected US Dec payroll report signaled economic strength that supported energy demand and crude prices. Friday's rally in the dollar index (DXY00) to a 2-year high was bearish for energy prices.
Crude prices found support Friday after the US imposed new sanctions on Russia's oil industry that could curb global oil supplies. The measures targeted Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude in the first 10 months of 2024, accounting for about 30% of its tanker flow, according to Bloomberg data. The US also targeted insurers and traders linked to hundreds of tanker cargoes.
Friday's US payroll report was better-than-expected and bullish for energy demand and crude prices. Dec nonfarm payrolls rose +256,000, stronger than expectations of +165,000 and the largest increase in 9 months. Also, the Dec unemployment rate unexpectedly fell -0.1 to 4.1%, showing a stronger labor market than expectations of no change at 4.2%.
A decline in Russian crude oil exports is supportive of crude oil prices. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -190,000 bpd to 2.88 million bpd in the week to January 5.
Crude garnered support Monday after Saudi Arabia raised its crude prices for Asian customers for delivery in February by 60 cents per bbl, above expectations of 10 cents per bbl, and a sign Saudi Arabia sees tighter supplies in its largest crude export market.
A drop in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -33% w/w to 48.02 million bbl in the week ended January 3.
The outlook for new sanctions on Iranian and Russian crude exports could limit global oil supplies and is bullish for prices. Mike Walz, President-elect Trump's pick for national security adviser, vowed a return to "maximum pressure" on Iran.
Crude found support last month after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Dec crude production fell -120,000 bpd to 27.05 million bpd.
Crude oil demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Nov apparent oil demand fell -2.14% y/y to 14.013 million bpd, and Jan-Nov apparent oil demand fell -3.26% y/y to 13.996 million bpd. China is the world's second-largest crude consumer.
Wednesday's EIA report showed that (1) US crude oil inventories as of January 3 were -5.8% below the seasonal 5-year average, (2) gasoline inventories were -1.4% below the seasonal 5-year average, and (3) distillate inventories were -4.8% below the 5-year seasonal average. US crude oil production in the week ending January 3 fell -0.1% w/w to 13.563 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported Friday that active US oil rigs in the week ending January 10 fell -2 to 480 rigs, modestly above the 2-3/4 year low of 477 rigs posted November 29. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
