WTI Crude Oil and Gasoline Prices Decline Amid Dollar Strength

April WTI crude oil (CLJ25) closed down -0.59 (-0.84%) on Friday, and April RBOB gasoline (RBJ25) ended the day down -0.0195 (-0.87%). Overall, both crude oil and gasoline prices experienced moderate losses, primarily influenced by a rally in the dollar index (DXY00), which reached a 2-week high. The stronger dollar tends to undercut energy prices, contributing to the downward pressure observed.

Impact of US Tariffs on Energy Prices

Concerns regarding potential US tariffs on trading partners are also weighing on the energy markets. President Trump confirmed on Thursday that tariffs on Canadian and Mexican goods would commence on March 4. Such tariffs could lead to increased US crude import prices, as the US imports approximately 4 million barrels per day (bpd) from Canada and around 400,000 bpd from Mexico.

Market Dynamics Affecting Output

Recent comments from Iraq’s oil minister added to market apprehension. Iraq has reached an agreement with Kurdistan to resume crude exports via an oil pipeline through Turkey, with plans to ship about 185,000 bpd. This pipeline has been inactive for the last two years due to payment disputes; however, Iraq will maintain its OPEC production cap.

The thawing relations between the US and Russia, alongside potential peace discussions regarding the Russia-Ukraine war, could also affect oil prices. These developments may result in reduced sanctions on Russia and the reinstatement of its oil exports.

Supportive Factors for Crude Prices

Crude oil prices found some support last week following a drone attack on a Russian pumping station that could hinder Kazakhstan’s crude oil exports by 30%. Furthermore, OPEC+ is considering delaying monthly supply increases scheduled to start in April, as reported by Bloomberg on Wednesday.

Sanctions and Production Updates

The US implemented new sanctions on Russia’s oil industry on January 10, targeting companies like Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of crude during the first 10 months of 2024. This action could further restrict global oil supplies. Weekly vessel-tracking data from Bloomberg indicated that Russian crude exports have fallen by -130,000 bpd to 3.09 million bpd as of February 2, while production decreased to 8.062 million bpd in January, which is -16,000 bpd below the OPEC+ quota.

Global Demand and Supply Considerations

China, the world’s largest crude importer, has shown signs of weakening crude oil demand. Data from Chinese customs revealed that its crude imports in 2024 fell -1.9% year-over-year, totaling 553 million metric tons (MMT). Conversely, there is a bullish signal in the decline of crude oil stored on tankers. According to Vortexa, crude held on stationary tankers dropped -12% week-over-week to 65.65 million barrels for the week ending February 21.

OPEC+ Production Strategy

During OPEC+’s monthly meeting on February 3, members decided not to change their oil production plans for the first quarter but will gradually restore output starting in April. This decision reflects a shift from earlier plans to raise production by 2.2 million bpd in installments from January to late 2025, pushing the completion date for these increases to September 2026. Last month, OPEC’s crude production fell -700,000 bpd to 27.03 million bpd.

US Oil Rig Count Decline

Baker Hughes reported that the number of active US oil rigs decreased by -2 to a total of 486 rigs in the week ending February 28. This count remains moderately above the three-year low of 472 rigs observed on January 24. Over the past two years, the number of US oil rigs has declined from a high of 627 rigs recorded in December 2022.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data in this article are intended solely for informational purposes. For more details, please view the Barchart Disclosure Policy
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