Crude Prices Supported by Geopolitical Risks and Possible Fed Rate Cut

October WTI crude oil (CLV25) today is up +0.98 (+1.54%), and October RBOB gasoline (RBV25) is up +0.0083 (+0.42%).

Crude oil and gasoline prices are moving higher today, with crude posting a 2.5-week high and gasoline posting a 3-week high.  Crude oil prices have support from doubts about negotiations for an end to the Russian-Ukrainian war.   Crude is also climbing on expectations for the Fed to cut interest rates at next month’s FOMC meeting, which could boost economic growth and energy demand.  Gains in crude accelerated today after prices rose above the 100-day moving average, triggering some buying from algorithmic-based traders.  Today’s stronger dollar is limiting gains in crude.

Crude prices also have support on concern that the Russian-Ukrainian war will continue, which could keep restrictions on Russian crude exports in place and even secondary restrictions could be added after Russian Foreign Minister Lavrov said there was no meeting planned between the leaders of Russia and Ukraine and that there “needs to be an agenda first” for a meeting to take place.  “This agenda is not ready at all.”

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 July crude production fell by -20,000 bpd to 28.31 million bpd.

An increase in crude oil held worldwide on tankers is bearish for oil prices.  Vortexa reported today 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.

Last Wednesday’s weekly EIA report showed that (1) US crude oil inventories as of August 15 were -5.6% below the seasonal 5-year average, (2) gasoline inventories were -0.7% below the seasonal 5-year average, and (3) distillate inventories were -13.0% below the 5-year seasonal average.  US crude oil production in the week ending August 15 rose by +0.4% w/w to 13.382 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.