October WTI crude oil (CLV25) on Friday closed up +0.14 (+0.22%), and October RBOB gasoline (RBV25) closed up +0.0066 (+0.33%).

Crude oil and gasoline prices on Friday settled higher, with crude posting a 2-week high and gasoline posting a 3-week high.  Friday's plunge in the dollar index (DXY00) to a 3.5-week low was bullish for energy prices.  Also, Friday's sharp rally in stocks shows confidence in the economic outlook, which is positive for energy demand.  Gains in crude were limited after Morgan Stanley forecast a global crude surplus between Q4 and Q2 of next year.

Oil prices have support from doubts about negotiations for an end to the Russian-Ukrainian war after Russian Foreign Minister Lavrov said Russia should have a say in security arrangements for Ukraine, and that any unilateral guarantees would be "hopeless."  

The outlook for a global crude surplus is bearish for oil prices after Morgan Stanley on Friday predicted crude prices will come under pressure "given the prospect of large surpluses between Q4 and Q2 of next year."  Also, demand is "well below the historical trend rate of growth," and non-OPEC supply is headed for a "strong spurt towards year-end."

Concerns about higher OPEC production are negative for crude prices after OPEC+ on August 2 endorsed an additional 547,000 bpd increase in its crude production for September 1.  OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026.  OPEC+ has 1.66 million bpd of supplies that are currently due to remain offline until late 2026.  OPEC July crude production fell by -20,000 bpd to 28.31 million bpd.

A decline in crude oil held worldwide on tankers is bullish for oil prices.  Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -12% w/w to 82.49 million bbl in the week ended August 15.

Wednesday's weekly EIA report showed that (1) US crude oil inventories as of August 15 were -5.6% below the seasonal 5-year average, (2) gasoline inventories were -0.7% below the seasonal 5-year average, and (3) distillate inventories were -13.0% below the 5-year seasonal average.  US crude oil production in the week ending August 15 rose by +0.4% w/w to 13.382 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.

Baker Hughes reported Friday that the number of active US oil rigs in the week ending August 22 fell by -1 to 411 rigs, just above the 3.75-year low of 410 rigs from August 1.  Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.25-year high of 627 rigs reported in December 2022.