January WTI crude oil (CLF25) Friday closed down -0.72 (-1.05%), and January RBOB gasoline (RBF25) closed down -0.0296 (-1.53%).

Crude oil and gasoline prices on Friday gave up early gains and settled moderately lower, with crude posting a 1-1/2 week low and gasoline dropping to a 2-month low.  Concerns that weakness in China's economy will dampen its crude demand are weighing on oil prices.  

Crude price on Friday initially moved higher after the dollar index (DXY00) fell to a 2-1/2 week low.  Also, expectations that OPEC+ will delay planned oil production increases when it meets next week are bullish for crude.  In addition, Friday's rally in the S&P 500 to a new record high shows confidence in the economic outlook that is positive for energy demand.  

Crude demand in China has weakened and is a bearish factor for oil prices.  According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd.  China is the world's second-largest crude consumer.

Crude has support on expectations that OPEC+ will delay an expected +180,000 bpd of production from January until Q2 of 2025, when the group meets online on December 5.  The group had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025.  Also, the UAE is being allowed to gradually phase on a further 300,000 bpd in recognition of recent increases to its production capacity.

An increase in crude oil held worldwide on tankers is bearish for oil prices.  Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +34% w/w to 74.83 million bbl in the week ended November 22.

Escalation of the Ukraine-Russian war is supportive of crude prices.  Russia launched a new hypersonic missile into the city of Dnipro last week, following Ukraine's expanded use of Western-provided long-range missiles against targets inside Russia,   and Russian President Putin warned today that Russia could strike “decision-making centers” in Kyiv with ballistic missiles.   Earlier this week, Putin also approved an updated nuclear doctrine that expands the conditions for Russia to use atomic weapons, including in response to a conventional attack on its soil.  

An increase in Russian crude exports is bearish for crude.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +100,000 bpd to 2.93 million bpd in the week to November 24.  Separately, Russia's Energy Ministry reported on October 23 that Russia's Sep crude production was 8.97 million bpd, down -13,000 bpd from Aug and just below the 8.98 million bpd output target it agreed to with OPEC+.

Wednesday's EIA report showed that (1) US crude oil inventories as of November 22 were -4.5% below the seasonal 5-year average, (2) gasoline inventories were -3.5% below the seasonal 5-year average, and (3) distillate inventories were -5.1% below the 5-year seasonal average.  US crude oil production in the week ending November 22 rose +2.2%  w/w to 13.49 million bpd, just below the record 13.50 million bpd from earlier this month.

Baker Hughes reported Wednesday that active US oil rigs in the week ending November 29 fell -2 rigs and matched the 2-3/4 year low of 477 rigs first posted in the week ending July 19.  The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.