November WTI crude oil (CLX25) on Monday closed up +0.59 (+1.00%), and November RBOB gasoline (RBX25) closed up +0.0012 (+0.39%).
Crude oil and gasoline prices settled higher on Monday as they recovered some of last Friday’s plunge. Crude prices rose after the Trump administration over the weekend signaled openness to reaching a trade deal with China. Crude prices also gained after President Trump said he is considering arming Ukraine with long-range Tomahawk missiles, which raises the risks of further disruptions to Russian oil supplies. Monday’s sharp rally in stocks also improved market sentiment and was supportive for asset markets. The strength of the dollar on Monday limited the upside in crude prices.
Last Friday, crude prices sank to a 5-month nearest-futures low, and gasoline plunged to a 4.5-year low following renewed trade tensions with China after President Trump threatened a “massive increase” of tariffs on Chinese goods, citing recent “hostile” export controls on rare-earth minerals. A protracted US-China trade war would weigh on global economic growth and energy demand and is bearish for crude prices.
Cooling tensions in the Middle East have reduced some of the risk premium in crude prices, weighing on crude as it decreases the likelihood of disruptions to the region’s crude supplies following the agreement between Israel and Hamas.
Crude prices found support after OPEC+ on October 5 agreed to a 137,000 bpd increase in its crude production target, starting in November, which was less than market expectations of a potential 500,000 bpd boost to production. OPEC+ is in the midst of boosting output by a further 1.66 million bpd to fully reverse the 2.2 million bpd production cut seen in early 2024. OPEC’s September crude production rose by +400,000 bpd to 29.05 million bpd, the highest in 2.5 years.
Reduced crude production in Russia is supportive for oil prices. Ukraine has targeted at least 15 Russian refineries over the past two months, exacerbating a fuel crunch in Russia and limiting Russia’s crude export capabilities. Ukrainian drone and missile attacks on Russian refineries have curbed Russia’s total refined-product flows to 1.94 million bpd in the first fifteen days of September, the lowest monthly average in over 3.25 years.
