Crude Oil and Gasoline Prices Drop Significantly
On Wednesday, December WTI crude oil fell by 2.55, or 4.18%, while December RBOB gasoline decreased by 0.0566, or 2.81%, reaching a three-week low for crude oil. The decline was driven by concerns over a global oversupply, as OPEC announced that a surplus had emerged sooner than anticipated. Additionally, the dollar’s strength contributed to this downward trend in energy prices. The EIA’s latest forecast also added pressure, raising its estimate for U.S. crude oil production in 2025 to 13.59 million barrels per day, an increase from 13.53 million the prior month.
OPEC’s revisions painted a grim picture for the oil market, shifting expectations for the third quarter from a deficit to a surplus, as U.S. output exceeded forecasts alongside an increase in OPEC’s own production. The organization now forecasts a surplus of 500,000 barrels per day for the third quarter, contrasting with last month’s anticipated deficit of 400,000 barrels per day.
On the bearish side, Saudi Arabia recently lowered the price of a key crude oil grade for deliveries to Asia next month, marking its lowest point in nearly a year. However, there are still some optimistic signs, particularly with hopes that the U.S. government will reopen soon, which could bolster economic growth and, by extension, energy demand. The Senate voted on Monday by a margin of 60-40 for an interim continuing resolution to fund the government, and the House is set to vote on it later today. If it passes, President Trump has indicated he would sign it into law.
China’s crude oil imports have also been a bright spot, rising by 3.1% year-on-year from January to October, reaching 471 million metric tons, helping to support prices given that China is the largest importer of crude oil.
Recent reports indicate the U.S. military might be edging towards a military operation concerning Venezuela, which is known to be the world’s 12th largest oil producer, further supporting oil prices.
At a meeting on November 2, OPEC+ announced an increase in production by 137,000 barrels per day for December, but plans to halt these increases in early 2026 due to the looming global oil surplus. The IEA has suggested that surpluses could reach an unprecedented 4 million barrels per day by 2026. While OPEC+ aims to restore 2.2 million barrels per day lost due to cuts made in early 2024, there’s still 1.2 million barrels per day left to bring back online. In October, OPEC’s production increased to 29.07 million barrels per day, its highest level in two and a half years.
Supporting the current oil prices is a decline in Russian crude oil exports. Ukraine has targeted numerous Russian refineries over recent months, exacerbating fuel shortages and limiting exports. Attacks have caused Russia’s maritime fuel shipments to drop to 1.88 million barrels per day—the lowest in over three years. By the end of October, about 13-20% of Russia’s refining capacity was offline, which translates to a production loss of around 1.1 million barrels per day. Furthermore, new sanctions from the U.S. and EU on Russian oil players continue to impact exports.
According to Vortexa, the volume of crude oil stored in tankers that had been docked for at least seven days increased by 11% year-on-year, reaching 95.18 million barrels in the week ending November 7.
Looking ahead, there seems to be a consensus that Thursday’s EIA report will show an increase of about 1.5 million barrels in crude oil inventories for the week ending November 7, while gasoline supplies might decrease by approximately 2.5 million barrels.
Last week, the EIA reported that U.S. crude oil inventories were 5.3% below the five-year seasonal average as of October 31, with gasoline inventories down 4.3% and distillate inventories 8.8% lower. U.S. crude oil production for that week saw a slight year-over-year increase of 0.1%, reaching a record 13,651,000 barrels per day.
Baker Hughes noted that the number of active U.S. oil rigs remained steady at 414 for the week ending November 7, slightly above the four-year low recorded in early August. Over the past couple of years, the oil rig count has plummeted from highs of 627 seen in December 2022.
