November WTI Crude Oil (CLX25) closed Monday up +0.59 (+1.00%) and November RBOB Gasoline (RBX25) closed up +0.0012 (+0.39%).
Crude oil and gasoline prices closed higher on Monday, recovering some of last Friday’s decline. Crude oil prices rose after the Trump administration over the weekend indicated its openness to reaching a trade deal with China. Crude oil prices also rose after President Trump said he is considering arming Ukraine with long-range Tomahawk missiles, raising the risk of further disruptions to Russian oil supplies. Monday’s strong rally in stocks also improved market sentiment and supported asset markets. The strength of the dollar on Monday limited the rise in crude oil prices.
Last Friday, crude oil prices sank to a five-month low, the closest to futures, and gasoline plummeted to a 4.5-year low following renewed trade tensions with China after President Trump threatened a “massive increase” in tariffs on Chinese goods, citing recent “hostile” controls on rare earth mineral exports. A prolonged trade war between the United States and China would affect global economic growth and energy demand and would be bearish for crude oil prices.
Cooling tensions in the Middle East have reduced some of the risk premium in crude oil prices, weighing on crude as the likelihood of disruptions to the region’s crude supplies following the deal between Israel and Hamas decreases.
Crude oil prices found support after OPEC+ agreed on October 5 to a 137,000 bpd increase in its crude production target, starting in November, which was lower than market expectations of a possible 500,000 bpd production increase. OPEC+ is in the midst of increasing production by another 1.66 million bpd to fully reverse the 2.2 million bpd production cut seen in early 2024. OPEC crude oil production in September increased by +400,000 bpd to 29.05 million bpd, the highest in two and a half years.
Reduced crude oil production in Russia supports oil prices. Ukraine has attacked at least 15 Russian refineries in the past two months, exacerbating Russia’s fuel crisis and limiting Russia’s crude oil export capabilities. Ukrainian drone and missile attacks on Russian refineries have limited Russia’s total refined products flow to 1.94 million bpd in the first fortnight of September, the lowest monthly average in more than 3.25 years.