Crude Posts Moderate Gains on Dollar Weakness and Tight Supplies


Rich Asplund, Barchart

Jul 29, 2022


Sep WTI crude oil (CLU22) on Friday closed up +2.20 (+2.28%), and Sep RBOB gasoline (RBU22) closed up +1.14 (+0.37%). 


Crude oil and gasoline prices on Friday climbed to 2-1/2 week highs and closed moderately higher.  A fall in the dollar index (DXY00) Friday to a 3-1/2 week low supported energy prices.  Crude also rose Friday on comments from the CEO of Exxon Mobil, who said he doesn't see any signs of major fuel demand destruction.  However, crude prices fell back from their best levels Friday on expectations for stronger U.S. crude production after weekly data from Baker Hughes showed active U.S. oil rigs rose to a 2-1/4 year high.


Friday's global economic data was mixed for energy demand and crude prices.  On the positive side, U.S. June personal spending rose +1.1% m/m, slightly stronger than expectations of +1.0% m/m.  Also, Eurozone Q2 GDP rose +0.7% q/q and +4.0% y/y, stronger than expectations of +0.2% q/q and +3.4% y/y.  In addition, Japan June industrial production rose a record +8.9% m/m, stronger than expectations of +4.2% m/m.  On the negative side, the U.S. July MNI Chicago PMI fell -3.9 to a nearly 2-year low of 52.1, weaker than expectations of 55.0.  Also, Japan Jun retail sales unexpectedly fell -1.4% m/m, weaker than expectations of +0.2% m/m and the biggest decline in 14 months.


Exxon Mobil CEO Woods said Friday that global energy demand has recovered to "near" pre-pandemic level, and he doesn't see any signs of major fuel demand destruction.  He also said that he expects a "tighter market" for petroleum products and "to lower prices, the industry needs to increase investment and catch up to recovering demand."


An increase in crude production from Libya is bearish for crude prices.  Libyan Oil Minister Mohammed Oun said Monday that Libya's crude production has risen to above 1.0 million bpd and will reach 1.2 million bpd in early August.  Libya's crude output in April collapsed after protesters forced the closure of several oil fields and ports.  As a result, crude exports from Libya, home to Africa's largest oil reserves, dropped to a 20-month low of 610,000 bpd in June.


The markets are waiting to see if OPEC+ will boost production beyond expected amounts at its upcoming meeting on August 3 in response to President Biden's recent trip to Saudi Arabia...