Crude Prices Push Higher on Dollar Weakness and Reduced Russian Oil Exports

January WTI crude oil (CLF26) on Monday closed up +0.77 (+1.32%), and January RBOB gasoline (RBF26) closed up +0.00474 (+2.60%).

Crude oil and gasoline prices settled higher on Monday, with crude posting a 1-week high.  Monday’s decline in the dollar index (DXY00) to a 2-week low is bullish for energy prices.  Also, reduced Russian crude exports are boosting oil prices after Ukrainian drone and missile attacks forced a key Russian Black Sea oil terminal to close operations.  In addition, heightened geopolitical risks in Venezuela are boosting crude prices after President Trump said airspace over Venezuela should be considered closed.   Venezuela is the world’s 12th-largest oil producer.

Crude oil rallied on Monday after Ukrainian drone and missile attacks over the weekend damaged a Russian Baltic Sea oil terminal, forcing it to close.  The Caspian Pipeline Consortium, which carries 1.6 million bpd of Kazakhstan’s crude exports, was forced to close after a pipeline was damaged at one of its moorings.

Crude also garnered support today after OPEC+ on Sunday said it will stick with plans to pause production increases during Q1 of 2026.

Reduced crude exports from Russia are underpinning crude prices.  On November 19, Vortexa data 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 knocked out 13% to 20% of Russia’s refining capacity by the end of October, curtailing 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.

Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose +12% w/w to 124.64 million bbls in the week ended November 28, the highest level in almost 2.5 years.

Last month, OPEC 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.

Last Wednesday’s EIA report showed that (1) US crude oil inventories as of November 21 were -3.8% below the seasonal 5-year average, (2) gasoline inventories were -3.3% below the seasonal 5-year average, and (3) distillate inventories were -6.9% below the 5-year seasonal average.  US crude oil production in the week ending November 21 fell -0.1% w/w to 13.814 million bpd, falling further back from the record high of 13.862 million bpd from the week of November 7.

Baker Hughes reported last Wednesday that the number of active US oil rigs in the week ending November 28 fell by -12  to a 4-year low of 407 rigs.  Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.

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