Oct WTI crude oil (CLV24) Thursday closed up +1.04 (+1.47%), and Oct RBOB gasoline (RBV24) closed up +4.93 (+2.45%).

Crude oil and gasoline prices rallied to 2-week highs on Thursday and settled moderately higher.  Crude rose Thursday after the Fed's aggressive 50 bp interest rate cut on Wednesday sparked risk-on sentiment in asset markets.  Crude oil prices are also moving higher in the hope that the Fed's aggressive rate cut will spur economic growth that boosts energy demand.  In addition, Thursday's rally in the S&P 500 to a new record high shows optimism in the economic outlook that is bullish for energy demand.  

Concerns that conflict in the Middle East may widen and disrupt the region's crude supplies is bullish for crude.  Israeli Defense Minister Gallant announced a "new phase" in the war with regional Islamist groups as Israel moved troops toward the Lebanon border, raising fears about a wider conflict that could involve Iran, a major oil producer.

Strength in the crude crack spread is bullish for crude prices as the crack spread climbed to a 2-week high Thursday, encouraging refiners to boost their crude purchases and refine it into gasoline and distillates.

Thursday's US economic reports were mixed for energy demand and prices.  On the positive side, weekly initial unemployment claims fell -12,000 to a 4-month low of 219,000, showing a stronger labor market than expectations of 230,000.  Also, the Aug Philadelphia Fed business outlook survey rose +8.7 to 1.7, stronger than expectations of 0.0.  On the negative side, Aug existing home sales fell -2.5% m/m to a 10-month low of 3.86 million, weaker than expectations of 3.90 million.

Reduced Libyan oil production and exports support oil prices as UN-led talks failed to break an impasse in Libya over control of the country's central bank, leading to reduced crude exports.  Libya's crude exports fell to 314,000 bpd last week from 468,00 bpd at the beginning of this month.   Earlier this month, Libya's eastern government declared force majeure on all oil fields, terminals, and crude export facilities as it called for a halt to all crude production and exports due to political conflict over who controls the country's central bank and oil revenues.

Signs of weakness in European fuel demand are bearish for crude prices after Italian refiner Eni SpA and Spain's Repsol SA, which together account for about 13% of Europe's oil refining capacity, said they were reducing processing at their plants because of weak margins, a sign of lackluster fuel demand in Europe.

A decline in crude oil held worldwide on tankers is bullish for prices.  Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -1.5% w/w to 65.53 million bbl in the week ended September 13.

Crude prices found support after OPEC+ on September 5 agreed to pause its scheduled crude production hike of 180,000 bpd in October and November due to recent weakness in crude prices and signs of fragile global energy demand.  

An increase in Russian crude exports is negative for crude.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +110,000 bpd to 3.25 million bpd in the week to September 15.  Meanwhile, a decline in Russian crude production is positive for oil prices after Russia's Energy Ministry reported last Tuesday that Russia's Aug crude production was 9.059 million bpd, down -30,000 bpd from July but +81,000 bpd above the output target it agreed to with OPEC+.

Wednesday's EIA report showed that (1) US crude oil inventories as of September 13 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were -0.5% below the seasonal 5-year average, and (3) distillate inventories were -8.6% below the 5-year seasonal average.  US crude oil production in the week ending September 13 fell -0.8% w/w to 13.2 million bpd, just below the record high of 13.4 million bpd from the week of August 16.

Baker Hughes reported last Friday that active US oil rigs in the week ending September 13 rose by +5 rigs to 488 rigs, modestly above the 2-1/2 year low of 477 rigs posted in the week ending July 19.  The number of US oil rigs has fallen over the past year from the 4-year high of 627 rigs posted in December 2022.
 

• Crude Rallies as Aggressive Fed Rate Cuts Spur Risk-On Sentiment in Asset Markets
• Crude Prices Close Lower on Energy Demand Concerns in China
• Crude Prices Slip on Chinese Fuel Demand Concerns
• Crude Prices Climb on US Economic Strength and Heightened Middle East Tensions