Mixed Energy Markets: Oil Drops as Gasoline Prices Rise
On Wednesday, June WTI crude oil (CLM25) settled at -0.52 (-0.82%), while June RBOB gasoline (RBM25) gained +0.0040 (+0.18%). The trading day saw mixed results for crude oil and gasoline prices, with gasoline reaching a six-week high.
Crude oil prices declined after the Energy Information Administration (EIA) reported an unexpected increase in weekly crude inventories. Additionally, comments from President Trump regarding a potential nuclear deal with Iran added pressure to crude prices by hinting at the possibility of lifting sanctions on Iranian crude exports, which could increase global supply. Gasoline prices, on the other hand, were buoyed by a more significant than anticipated drop in gasoline supplies.
Geopolitical Factors Impacting Prices
Geopolitical developments in the Middle East also contributed negatively to crude prices. President Trump announced that the U.S. would end its bombing campaign against Houthi rebels in Yemen, following a ceasefire facilitated by Oman. Vice President Vance mentioned last Wednesday that a nuclear accord with Iran may lead to its reintegration into the global economy.
However, crude prices received some support earlier in the week due to a tighter outlook for global oil supplies. The U.S. State Department imposed sanctions on Sepehr Energy Jahan Nama Pars, an alleged Iranian front company, for facilitating the shipment of Iranian oil to China, using the proceeds to fund weapons development, including missile and drone technology.
OPEC+ Production Dynamics
Crude prices also responded to OPEC+’s recent decision to increase crude production by 411,000 barrels per day (bpd) in June. Saudi Arabia indicated that further production increases might follow, aimed at reducing oil prices and addressing overproduction by OPEC+ members like Kazakhstan and Iraq.
OPEC+ plans to gradually restore 2.2 million bpd of crude production, having extended the timeline for full restoration until September 2026. In April, OPEC crude production fell by 200,000 bpd to 27.24 million bpd.
Market Inventory and Demand Trends
A rise in crude oil stored on stationary tankers, which increased by 11% week-over-week to 93.32 million barrels, added bearish sentiment to the market. In contrast, the prospect of rising U.S. gasoline demand supports crude prices. The American Automobile Association projects that 39.4 million Americans will travel by car this Memorial Day weekend, up 3.1% from the previous year, aided by gasoline prices 50 cents a gallon lower than last year.
U.S. Inventory and Production Data
According to Wednesday’s EIA report, U.S. crude oil inventories unexpectedly rose by 3.45 million barrels, against expectations of a 2 million barrel draw. Conversely, EIA gasoline supplies declined by 1.2 million barrels, which was a larger draw than the anticipated 900,000 barrels. EIA distillate stockpiles also decreased unexpectedly, falling 3.2 million barrels to a 20-year low.
As of May 9, U.S. crude oil inventories were reported to be 6.5% below the seasonal five-year average, while gasoline inventories were 2.8% below the same average. U.S. crude oil production slightly rose by 0.1% week-over-week to 13.387 million bpd, still below the record high of 13.631 million bpd set in December.
Baker Hughes reported a decrease in active U.S. oil rigs, with the count falling by five to 474, just above a multi-year low. This marks a significant decline from the five-year high of 627 rigs reached 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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