October WTI crude oil (CLV25) on Monday closed up +0.61 (+0.97%), and October RBOB gasoline (RBV25) closed up +0.0280 (+1.41%).

Crude oil and gasoline prices settled higher on Monday, with gasoline posting a 1-week high.  Monday's weaker dollar was supportive for energy prices.  Also, concerns over a decline in Russian oil exports are boosting prices after Ukraine stepped up its drone attacks on Russian refineries.  In addition, Monday's rally in the S&P 500 to a new record high shows confidence in the economic outlook and is supportive of energy demand and crude prices.  Gains in crude were limited after Monday's weaker-than-expected US and Chinese economic news signaled weakness in energy demand.

Ukraine has stepped up its attacks on Russian refineries and oil infrastructure, which is bullish for crude prices as it curbs Russian crude exports and tightens global oil supplies.  The Kirishi refinery, one of Russia's biggest refineries that has an annual processing capacity of over 20 million tons, halted crude processing after damage caused by a Ukrainian drone attack on Sunday.  Also, Ukrainian drone attacks have damaged Russian oil infrastructure and crude-exporting hubs along Russia's Baltic Coast.  Ukrainian drone and missile attacks on Russian refineries have curbed Russia's crude-processing runs to 4.98 million bpd in the first three days of September, the lowest monthly average in over 3.25 years.  

Monday's weaker-than-expected global economic news is bearish for energy demand and crude prices.  The US Sep Empire manufacturing survey of general business conditions fell -20.6 to a three-month low of -8.7, weaker than expectations of 5.0.  Also, China's Aug industrial production rose +5.2% y/y, weaker than expectations of +5.6% y/y.  In addition, the China Aug surveyed jobless rate unexpectedly rose +0.1 to a 6-month high of 5.3%, showing a weaker labor market than expectations of no change at 5.2%.

A decrease 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 -7.2% w/w to 67.96 million bbl in the week ended September 12.

Crude prices have support on concerns that the ongoing war in Ukraine could lead to additional sanctions on Russian energy exports, reducing global oil supplies.  President Trump said last Friday that his patience with Russian President Putin was "running out fast" for continuing the war in Ukraine, and he threatened new economic sanctions against Russia.  The US proposed that the Group of Seven allies impose tariffs as high as 100% on China and India for their purchases of Russian oil in an effort to convince Russia to end the war in Ukraine.

Escalation of geopolitical risks in Europe and the Middle East is bullish for crude prices.  Geopolitical tensions in Europe escalated last Wednesday after Poland shot down Russian drones that crossed into its territory in Russia's latest attacks on Ukraine.  Also, Israel last Tuesday launched a strike on Doha, Qatar, targeting the senior leadership of Hamas.  Qatar said the attack by Israel violated international law and threatens to widen the conflict in the Middle East, the source of about one-third of global oil supplies.

Crude prices also have support after OPEC+ agreed on September 7 to raise its crude production by 137,000 bpd, starting in October.  This is less than the 547,000 bpd increase the group decided to boost output in September and August.  OPEC+ also said restarting the remainder of the 1.66 million bpd crude production it had idled will be contingent on "evolving market conditions."

Concerns about a global oil glut are bearish for crude prices after the International Energy Agency (IEA) last Thursday boosted its 2026 global crude surplus estimate to 3.33 million bpd, +360,000 bpd higher than anticipated in August, citing plans by OPEC+ to revive its crude production.

Concerns about higher OPEC production are negative for crude prices as 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 production capacity that is due to remain offline until late 2026.  OPEC Aug crude production rose by +400,000 bpd to 28.55 million bpd, the highest in over two years.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of September 5 were -3.2% below the seasonal 5-year average, (2) gasoline inventories were -0.6% below the seasonal 5-year average, and (3) distillate inventories were -10.4% below the 5-year seasonal average.  US crude oil production in the week ending September 5 rose by +0.5% w/w to 13.495 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.

Baker Hughes reported last Friday that the number of active US oil rigs in the week ending September 12 rose by +2 to 416 rigs, just above the 4-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 5.5-year high of 627 rigs reported in December 2022.