Crude Oil and Gasoline Prices Edge Up Amid Sanctions and Demand Concerns
March WTI crude oil (CLH25) has risen by +0.15 (+0.21%), while March RBOB gasoline (RBH25) has increased by +0.0191 (+0.93%).
US Sanctions Impact Oil Market
Today’s slight rise in crude and gasoline prices comes as the US strengthens sanctions on Iranian crude exports. The US Treasury has targeted an international network that facilitates the shipment of Iranian oil to China. However, a stronger dollar and comments from President Trump, who has vowed to increase US oil production, have limited these gains.
UK Economic Forecasts Weigh on Energy Demand
The Bank of England (BOE) has reduced its 2025 UK GDP forecast to 0.75%, down from 2.50% projected in November. This adjustment is seen as bearish for energy demand and crude prices.
Decline in Crude Oil Stocks Provides Support
Crude oil stored on tankers is down by -6.9% week-over-week, reaching 67.30 million barrels as of January 31, according to Vortexa. This decline is considered bullish for oil prices.
OPEC+ Sticks to Production Plans
During its monthly meeting, OPEC+ announced no changes to its production plans for the first quarter. However, it will gradually restore crude output beginning in April.
US Sanctions on Russia Generate Further Concerns
On January 10, the US imposed new sanctions targeting Russia’s oil industry, aimed at reducing global oil supplies. These measures impacted Gazprom Neft and Surgutneftgas, which together exported approximately 970,000 barrels per day (bpd) in 2024’s first ten months, as reported by Bloomberg. Additional sanctions affect insurers and traders linked to numerous tanker shipments.
Russian Crude Exports Decline
Recent data shows that Russian crude exports fell by -130,000 bpd to 3.09 million bpd, supporting crude oil prices.
Heightened Sanction Threats Boost Price Outlook
The potential for new sanctions on Iranian and Russian crude exports may limit global oil supplies, which could lead to higher prices. National security adviser Mike Walz emphasized a return to ‘maximum pressure’ on Iran. Meanwhile, US Treasury Secretary Bessent expressed support for increased sanctions on Russian oil majors to discourage the ongoing war in Ukraine.
OPEC+ Adjusts Crude Production Plans
Last month, OPEC+ adjusted its planned crude production increase down by +180,000 bpd from January to April. The group will now unwind its output cuts gradually, pushing back its previously agreed restoration of 2.2 million bpd until September 2026. In January, OPEC’s crude production decreased by -700,000 bpd to 27.03 million bpd.
Weakening Demand from China
Concerns about recovering crude oil demand in China are also affecting oil prices. Custom data indicates a -1.9% year-over-year fall in China’s crude imports in 2024, totaling 553 million metric tons. This decline is significant given China’s status as the world’s largest crude importer.
US Inventory Updates and Rig Counts
In Wednesday’s EIA report: (1) US crude oil inventories stood -3.8% below the seasonal 5-year average, (2) gasoline inventories were +0.3% above the seasonal average, and (3) distillate inventories were -12.4% below the average. US crude oil production increased by +1.8% week-over-week to 13.478 million bpd, approaching the record high of 13.631 million bpd set in December 2022.
Baker Hughes reported that active US oil rigs rose by +7 to reach 479 rigs, bouncing back from last week’s 3-year low of 472. Over the past two years, the number of oil rigs has significantly declined from a peak of 627 in December 2022.
On the date of publication, Rich Asplund did not have any positions in 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
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