Crude Oil Prices Decline Amid Energy Emergency Plans
Trade Tensions and Increased Supply Pressure Weigh on Markets
February WTI crude oil (CLG25) closed down -1.99 (-2.56%) on Tuesday, while February RBOB gasoline (RBG25) fell -0.0279 (-1.32%).
On Tuesday, both crude and gasoline prices hit one-week lows, declining moderately. A significant drop in crude prices followed President Trump’s announcement on Monday about declaring a national energy emergency and his intention to ramp up US oil production. Additionally, concerns regarding a potential trade war surfaced, as Trump hinted at imposing import tariffs up to 25% on goods from Canada and Mexico effective February 1. Interestingly, a weaker dollar on Tuesday provided some support for crude prices.
Global crude stockpiles are also affecting market sentiments. Vortexa reported a 2.5% weekly increase in crude oil stored on stationary tankers, reaching 54.23 million barrels during the week ending January 17.
Crude prices saw support from the sanctions imposed on Russia’s oil sector on January 10, aimed at limiting global oil supplies. This crackdown specifically targeted Gazprom Neft and Surgutneftgas, which collectively exported about 970,000 barrels per day (bpd) of Russian crude during the first ten months of 2024, roughly 30% of its tanker flow, noted Bloomberg data. The sanctions also impacted insurers and traders connected to numerous tanker cargoes.
Reports indicate a decline in Russian crude oil exports, further supporting crude prices. According to Bloomberg’s weekly tracking data, exports fell by -260,000 bpd to 2.75 million bpd in the week ending January 19.
Potential new sanctions against Iranian and Russian crude may limit global supplies, which would have a positive impact on prices. Mike Walz, appointed by President Trump as national security adviser, reiterated a commitment to resume “maximum pressure” on Iran. Furthermore, incoming Treasury Secretary Bessent expressed full support for escalating sanctions, particularly toward Russian oil companies, last Thursday.
Support for crude oil also emerged after OPEC+ decided to delay a planned 180,000 bpd increase in production from January to April. The United Arab Emirates (UAE) announced a delay in its own planned increase of 300,000 bpd until April. Originally, OPEC+ had agreed to restore 2.2 million bpd of output gradually until late 2025; this timeline has now been extended to September 2026. In December, OPEC crude production decreased by -120,000 bpd to 27.05 million bpd.
However, declining crude demand in China poses a bearish challenge for prices. Chinese customs data revealed that crude imports fell by -1.9% year-on-year to 553 million metric tons in 2024, as China remains the world’s largest crude importer.
The EIA’s report from last Wednesday illustrated a tightening market, showing that US crude oil inventories as of January 10 were -6.3% below the seasonal five-year average. Gasoline inventories were -0.9% below this average, while distillate inventories fell -4.2%. US crude oil production slightly decreased by -0.6% week on week to 13.481 million bpd, just below the record high of 13.631 million bpd set during the week of December 6.
On the rig count front, Baker Hughes noted last Friday that the number of active US oil rigs fell by -2 to 478 rigs in the week ending January 17, remaining just above the two-and-three-quarter-year low of 477 rigs recorded on November 29. The oil rig count in the US has decreased over the past two years from a four-and-a-half-year high of 627 rigs in December 2022.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
