Crude Oil and Gasoline Prices Hit Multiyear Lows Amid Trade Tensions

On Friday, May WTI crude oil (CLK25) closed down $4.96 (-7.41%), while May RBOB gasoline (RBK25) fell $0.1098 (-5.07%).

Market Factors Driving Price Declines

Crude oil and gasoline prices decreased for the second consecutive day, with crude dropping to a four-year low and gasoline reaching a one-month low. This downturn was primarily driven by escalating trade tensions as China imposed 34% tariffs on U.S. goods in retaliation for U.S. tariffs, further straining the global economy and potentially reducing energy demand. Additionally, a stronger dollar contributed to bearish sentiment around crude prices, while a significant drop in the S&P 500 to an 11-month low eroded confidence in economic stability.

OPEC+ Production Changes Affecting Prices

The price decline was compounded by OPEC+’s announcement on Thursday that it would increase crude production by 411,000 barrels per day (bpd) in May—significantly more than the 138,000 bpd added this month. This move aims to reverse a two-year-long production cut while gradually restoring a total of 2.2 million bpd. The timeline for fully restoring these production levels has now shifted to September 2026, rather than the initially projected late 2025. In March, OPEC reported an increase in production of 80,000 bpd, reaching a 13-month high of 27.43 million bpd.

Geopolitical Tensions and Their Impact on Crude Prices

Crude oil prices found some support earlier this week when President Trump expressed anger towards Russian President Putin for failing to agree to a ceasefire in Ukraine. Trump indicated that he might consider imposing “secondary tariffs” on Russian crude exports if hostilities persist.

Furthermore, a decrease in the amount of crude oil stored on tankers—which fell by 5.5% week-on-week to 55.67 million barrels as of March 28—could potentially bolster oil prices. This report came from Vortexa, which tracks such data.

Continued U.S. sanctions aimed at a China-based oil refinery and other entities involved in Iranian crude shipping have further tightened the market. These actions are part of a broader strategy to pressure Iran into reaching a new nuclear deal, with analysts at Rystad Energy suggesting that up to 1.5 million bpd of Iranian crude could be removed from global supplies.

Middle East Tensions Contributing to Market Instability

Ongoing geopolitical instability in the Middle East is also supporting crude prices. Israel’s renewed airstrikes in Gaza have ended a nearly two-month ceasefire with Hamas, with Israeli Prime Minister Netanyahu pledging to increase military action to address hostilities. Concurrently, the U.S. has escalated military operations against Yemen’s Houthi rebels, signaling a commitment to address threats to shipping in the region.

Production Insights and Industry Updates

The U.S. Treasury Department’s January sanctions on Russia’s oil industry have raised concerns over global supplies, specifically targeting enterprises that historically exported around 970,000 bpd. Meanwhile, insights from the Energy Information Administration (EIA) revealed last week that U.S. crude oil inventories were 4.6% below the seasonal five-year average as of March 28. In contrast, gasoline inventories saw a 2.0% increase relative to the same average, while distillate inventories were down 6.0%.

U.S. crude oil production remained stable at 13.58 million bpd for the week ending March 28, slightly below the record high of 13.631 million bpd reached in December 2022. On the rig count front, Baker Hughes reported an increase of five active U.S. oil rigs, bringing the total to 489 rigs—the highest in ten months, but still down from the 627 rigs recorded 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.

More news from Barchart

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.