December WTI crude oil (CLZ25) on Wednesday closed down -1.30 (-2.14%), and December RBOB gasoline (RBZ25) closed down -0.0672 (-3.36%).
Crude oil and gasoline prices settled sharply lower on Wednesday, with gasoline falling to a 1.5-week low. Wednesday’s rally in the dollar index (DXY00) to a 2-week high was bearish for energy prices. Crude prices also came under pressure on Wednesday from a report from Axios that said the Trump administration has been secretly working with Russia to draft a new plan to end the war in Ukraine. Energy prices remained lower after a mixed EIA inventory report showed that weekly crude supplies fell more than expected, while gasoline and distillate stockpiles rose more than expected.
Oil prices are supported by news of reduced crude exports from Russia, after Wednesday’s data from Vortexa showed Russia’s oil product shipments fell to 1.7 million bpd in the first 15 days of November, the lowest in more than 3 years. Ukraine has targeted at least 28 Russian refineries over the past three months, exacerbating a fuel crunch in Russia and limiting Russia’s crude export capabilities. Ukraine has knocked out 13% to 20% of Russia’s refining capacity by the end of October, curbing production by as much as 1.1 million bpd. New US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.
Oil prices have underlying support from continued geopolitical risks related to Russia, last Friday’s seizure by Iran of an oil tanker in the Gulf of Oman, and the US military buildup for a possible attack on Venezuela, which is the world’s 12th-largest oil producer.
OPEC last Wednesday revised its Q3 global oil market estimates from a deficit to a surplus, as US production exceeded expectations and OPEC also ramped up crude output. OPEC said it now sees a 500,000 bpd surplus in global oil markets in Q3, versus last month’s estimate for a -400,000 bpd deficit. Also, the EIA raised its 2025 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month.
OPEC+ at its November 2 meeting announced that members will raise production by +137,000 bpd in December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. The IEA in mid-October forecasted a record global oil surplus of 4.0 million bpd for 2026. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC’s October crude production rose by +50,000 bpd to 29.07 million bpd, the highest in 2.5 years.