December WTI crude oil (CLZ24) Tuesday closed up +0.23 (+0.33%), and December RBOB gasoline (RBZ24) closed up +0.0194 (+0.96%).

Crude oil and gasoline prices Tuesday rallied to 1-week highs and closed moderately higher.  Crude found support Tuesday from a weaker dollar and an escalation of the Ukraine-Russian war.   However, crude prices fell back from their best levels after the International Atomic Energy Agency (IAEA) said Iran agreed to stop producing near bomb-grade uranium.  

Escalation of the Ukraine-Russian war was supportive for crude prices after Ukraine carried out their first missile strikes on a border region in Russia using Wester-supplied missiles, and Russian President Putin 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.  

Strength in the crude crack spread supports crude prices after the crack spread Tuesday rose to a nearly 3-month high, encouraging refiners to boost their crude purchases and refine the crude into gasoline and distillates.

Crude prices came under pressure Tuesday after the IAEA said Iran has agreed to stop producing uranium enriched close to the level required for nuclear weapons, potentially easing tensions in the Middle East.  Also weighing on crude prices was a report from Reuters that said Hezbollah has agreed to a US proposal for a cease-fire with Israel.

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 -14% w/w to 50.97 million bbl in the week ended November 15.

Concerns that Middle East hostilities could escalate are bullish for crude when Iranian supreme leader Ayatollah Ali Khamenei warned of a "crushing response" to Israel's recent air strikes on Iran.  An escalation of hostilities between Iran and Israel could widen the conflict in the Middle East and disrupt the region's crude supplies.  

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.

A decline in Russian crude exports is bullish for crude.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -740,000 bpd to a 4-month low of 2.83 million bpd in the week to November 17.  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+.

The consensus is that Wednesday's weekly EIA crude inventories will fall by -85,000 bbl, and gasoline supplies will climb by +750,000 bbl.

Last Thursday's EIA report showed that (1) US crude oil inventories as of November 8 were -4.4% below the seasonal 5-year average, (2) gasoline inventories were -4.3% below the seasonal 5-year average, and (3) distillate inventories were -5.4% below the 5-year seasonal average.  US crude oil production in the week ending November 8 fell -0.7%  w/w to 13.4 million bpd, falling back from the record 13.5 million bpd in the prior week.

Baker Hughes reported last Friday that active US oil rigs in the week ending November 15 fell -1 rig to 478 rigs, just above the 2-3/4 year low of 477 rigs 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.