Crude Oil Prices Experience Moderate Gains Despite Trade Concerns

On Thursday, June WTI crude oil (CLM25) closed up $0.52 (+0.84%), while June RBOB gasoline (RBM25) gained $0.0220 (+1.06%). The energy market showed resilience as both crude oil and gasoline prices posted moderate gains, largely supported by a weaker dollar. Additionally, a strong stock market reflects confidence in the economic outlook, suggesting a potential increase in energy demand.

However, concerns linger over the ongoing China-US trade war. Treasury Secretary Bessent stated that President Trump has not offered to unilaterally reduce tariffs on China, which could dampen economic growth and energy demand.
Oversupply fears are also bearish for crude prices, particularly after reports indicated that several OPEC+ members might advocate for accelerated oil output increases in June. Kazakhstan’s energy minister emphasized a commitment to maintaining production levels to prioritize national interests, which could strain relations with Saudi Arabia. Should Saudi Arabia respond by boosting its crude output, it could further saturate global markets. The OPEC+ meeting set for May 5 aims to address the June production plan.

Recently, crude oil prices have been pressured by the possibility of a US-Iran nuclear deal. Such an agreement could lift export restrictions on Iranian crude oil, as Iran’s foreign minister suggested a more favorable understanding with the US following recent talks on its nuclear program.

An increase in crude oil held on tankers also weighs on prices. Vortexa reported a 19% week-over-week rise in crude stored on tankers that were stationary for at least seven days, totaling 78.19 million barrels, marking the highest level in eight months.

April has been a challenging month for crude oil, with prices dipping to a four-year low on April 9. Tariff uncertainties persist, as lingering concerns about global economic growth and energy demand continue to put pressure on energy prices, despite President Trump’s suspension of reciprocal tariffs last Wednesday.

However, stronger crude demand from China, the largest crude importer, offers some support for oil prices. According to Reuters, China’s crude imports in March surged to 12.1 million barrels per day (bpd), the highest since August 2023. Meanwhile, OPEC+ plans to raise production for May by 411,000 bpd, significantly exceeding the 138,000 bpd added in the previous month. This shift is part of a broader strategy to recalibrate production levels after a two-year cut, with full restoration now expected by September 2026.

Crude oil found additional support following recent sanctions by the US Treasury Department, which targeted entities involved in shipping Iranian crude. This move is intended to further pressure Iranian exports amid ongoing negotiations for a new nuclear deal. According to Rystad Energy A/S, such sanctions could potentially remove up to 1.5 million bpd of Iranian crude from global markets.

Heightened tensions in the Middle East continue to create uncertainty in crude supply. Israel has intensified airstrikes against Hamas, and the US has also conducted strikes on Houthi rebels in Yemen, aiming to deter attacks on vessels in the Red Sea. Such geopolitical developments could disrupt supplies, further impacting oil prices.

In addition, the US imposed new sanctions on Russia’s oil sector on January 10. These measures target Gazprom Neft and Surgutneftgas, which accounted for 970,000 bpd of Russian exports in early 2024. Data indicates that Russian oil product exports rose to a five-month high of 3.45 million bpd in March, with recent reports showing week-over-week increases in crude exports.

The latest EIA report indicated that as of April 18, US crude oil inventories were down 5.3% compared to the seasonal five-year average. Gasoline inventories decreased by 2.5%, and distillate stocks were down 13.1% below the average. US crude oil production remained steady at 13.46 million bpd, just shy of the record high reached in December 2022.

Baker Hughes reported last Thursday an increase in active US oil rigs, now at 481, marking a slight rise above the three-year low of 472 rigs recorded earlier this year. A significant decline in the number of active rigs has occurred over the past two years, down from a peak 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy.
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