Crude Oil and Gasoline Prices Rise: EIA Report Insights

On Wednesday, April WTI crude oil (CLJ25) closed up +1.43 (+2.16%), while April RBOB gasoline (RBJ25) saw an increase of +0.0451 (+2.14%). The moderate gains in crude oil and gasoline prices followed a weekly EIA inventory report that supported crude prices. Crude supplies increased less than expected, and gasoline stockpiles declined more significantly than forecasts predicted.

Geopolitical tensions contributed to rising crude prices, particularly after Houthi rebels announced they would resume attacks on Israeli ships unless Israel lifted its ban on aid into Gaza. However, escalating trade tensions pose a limitation on crude gains following the implementation of US tariffs on steel and aluminum this week. In response, the EU and Canada imposed their own tariffs on some US goods, raising concerns about a potential global trade war that could dampen economic growth and energy demand.

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Support for crude prices remains in the medium term thanks to US Energy Secretary Wright’s announcement last Thursday that he intends to seek up to $20 billion to refill the Strategic Petroleum Reserve. The reserve currently holds 395 million barrels but can accommodate up to 700 million barrels.

Furthermore, last Thursday, Treasury Secretary Bessent stated the US is prepared to “shut down” Iran’s oil sector to promote peace in the Middle East, providing additional support for crude prices. However, negative factors are emerging as increased Russian oil exports put downward pressure on prices. Data compiled by Bloomberg and analytics firm Vortexa shows that Russian oil product exports in February reached a one-year high of 2.5 million barrels per day (bpd).

Crude prices faced additional pressure when OPEC+ announced they would resume some halted crude output in April, adding 138,000 bpd to global supplies. This decision marks the first in a series of planned monthly production increases aimed at reversing a two-year production cut, with a gradual total restoration of 2.2 million bpd expected. Initially, OPEC planned to restore production by late 2025, but this timeline has now been pushed back to September 2026. For February, OPEC’s crude production rose +320,000 bpd to a 14-month high of 27.35 million bpd.

In terms of sanctions, the US implemented new measures on Russia’s oil industry on January 10, which may limit global oil supplies. The sanctions targeted Gazprom Neft and Surgutneftgas, which together exported about 970,000 bpd of crude in the first ten months of 2024, accounting for approximately 30% of its tanker flow, as reported by Bloomberg. Additionally, the US targeted insurers and traders linked to hundreds of tanker cargoes. Weekly data from Bloomberg indicated that Russian crude exports fell by -45,000 bpd to 3.48 million bpd in the week ending March 9.

Moreover, China’s weakening crude oil demand adds a bearish element for oil prices. According to custom data from China, crude imports fell -1.9% year-on-year to 553 million metric tons in 2024, reflecting the nation’s status as the world’s largest crude importer.

Another bearish indicator for oil prices is an increase in crude oil stored on tankers. Vortexa reported a +4.9% weekly rise in crude oil held on stationary tankers, reaching 84.15 million barrels in the week ended March 7.

According to Wednesday’s EIA inventory report, US crude inventories rose +1.45 million barrels, less than the anticipated +2.0 million barrels. Conversely, EIA gasoline supplies fell -5.7 million barrels, exceeding expectations of -1.6 million barrels. Additionally, crude supplies at Cushing, the delivery point for WTI futures, decreased by -1.2 million barrels.

The EIA report highlighted several key points: (1) US crude oil inventories as of March 7 remained -5.1% below the seasonal five-year average, (2) gasoline inventories rose +1.3% above the seasonal five-year average, and (3) distillate inventories were -4.8% below the five-year seasonal average. In the week ending March 7, US crude oil production increased by +0.5% to 13.575 million bpd, slightly below the record high of 13.631 million bpd reached in early December.

Baker Hughes reported on the same day that the number of active US oil rigs remained unchanged at 486 rigs during the week ending March 7. This figure is moderately above the three-year low of 472 rigs recorded on January 24. Over the past two years, the number of US oil rigs has declined from a 4.5-year high of 627 rigs noted 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 is 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.