December WTI crude oil (CLZ26) is up +2.92 (+2.92%), and December RBOB gasoline (RBZ26) is up +0.0289 (+0.94%).
Dec WTI crude oil prices are up +2.9% today after the Wall Street Journal reported late Tuesday that the US has told several Persian Gulf countries to be prepared for a short, intense military campaign against Iran. WSJ said President Trump hasn’t yet decided to proceed with the attack but is leaning toward an attack after next Tuesday’s mid-term elections. Meanwhile, Prime Minister Netanyahu is leading in the vote count from Tuesday’s Israeli election, increasing the odds that Israel might join any US attack.
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In a bullish factor, today’s weekly EIA report showed US crude oil inventories fell by -1.9 million bbls, larger than market expectations of a -1 million bbl decline and the fourth straight weekly drop. Gasoline inventories rose +3.87 million bbls, while distillate inventories fell -1.46 million bbls. In a bearish factor, US crude oil production rose to a new record high.
Despite the ongoing hostilities, oil continues to flow in the Middle East. Oil transiting the Strait of Hormuz so far in October was 16.7 million bpd according to Kpler and 15.4 million bpd according to Vortexa, approaching pre-war levels of about 19 million bpd. US Energy Secretary Wright said on Monday that Persian Gulf oil flows have recovered to about 80% of their pre-war level, though refined-product shipments remain constrained.
Higher Saudi crude output is bearish for crude prices. Saudi Arabia said its Sep crude production rose by 2 million bpd (+40% m/m) to 8.732 million bpd, recovering from a 36-year low in August. However, Saudi oil production continues to be threatened by Houthi missile attacks on Saudi Arabia and by the Houthi threats to oil shipments near the Bab-al-Mandeb Strait.
Recent attacks by Ukraine on Russian oil infrastructure have curbed Russian crude production and exports. Ukraine attacked Russian fuel-producing plants 15 times in September and 22 times in August, targeting five of Russia’s ten largest oil-processing plants. According to EA Analytics, Russian crude-processing rates averaged 3.51 million bpd in July, the lowest in 24 years, amid damage to Russian energy infrastructure caused by drone and missile attacks from Ukraine. Russian crude processing rates recovered slightly to 3.98 million bpd in September as damaged refineries struggle to come back online.
