Crude Oil Prices Dip Amid Global Supply Concerns
March WTI crude oil (CLH25) closed down -0.55 (-0.77%) on Friday, while March RBOB gasoline (RBH25) fell -0.0208 (-0.99%).
Market Pressures from Trade Tariffs and Global Events
Crude oil prices decreased on Friday due to ongoing worries about US reciprocal tariffs announced earlier in the week, potentially impacting global economic growth and energy demand. In addition, there is cautious optimism regarding progress in the Russia-Ukraine war, which could result in reduced sanctions on Russian oil and stimulate market recovery. The International Energy Agency (IEA) and the US Energy Information Administration (EIA) projected a slight oil surplus for 2024.
Dollar Weakness and Sanctions Push Prices Up
Despite the overall decline, prices found some support from a weaker dollar. Additionally, expectations for stricter US sanctions on Iranian oil exports added another layer of complexity to the market. US Treasury Secretary Bessent highlighted plans to cut Iranian oil exports by over 90%. The US Treasury also imposed sanctions last Thursday on an international network involved in shipping Iranian crude to China.
Saudi Arabia and Regional Adjustments
Support for oil prices also emerged this week as Saudi Arabia, Iraq, and the United Arab Emirates raised their selling prices for crude to Asian customers for March delivery. This came amid reports indicating that EU countries may begin seizing Russia’s unauthorized oil-exporting tankers under international law, citing environmental and piracy concerns. Moreover, new US sanctions on Russia’s oil industry aim to limit global oil supplies, specifically targeting Gazprom Neft and Surgutneftgas, responsible for about 970,000 barrels per day (bpd) of Russian crude in late 2024.
Russian Production and Global Crude Demand
Recent data show a decline in Russian crude exports, which fell by -130,000 bpd to 3.09 million bpd in early February. Russian oil production dropped to 8.062 million bpd in January, remaining -16,000 bpd below its OPEC+ quota. Conversely, weaker crude oil demand in China, the world’s largest crude importer, is exerting downward pressure on prices, with imports declining by -1.9% year-over-year to 553 million metric tons in 2024.
Tanker Storage Trends and OPEC+ Decisions
On a positive note for oil prices, the amount of crude oil stored on tankers that have been stationary for at least seven days decreased by -14% week-over-week to 65.79 million barrels for the week ending February 7, according to Vortexa. Similarly, OPEC+ announced during its recent monthly meeting that it would maintain its oil-production plans for the first quarter of the year, with gradual output restoration slated to commence in April. The group also postponed a planned increase of +180,000 bpd in production from January to April to a later date.
US Supply Data and Rig Count
According to the EIA, US crude oil inventories as of February 7 are -4.2% below the seasonal five-year average. Gasoline inventories also fell to -1.2% below the same average, while distillate inventories are -11.2% lower. In the week ending February 7, US crude oil production rose slightly by +0.1% to 13.494 million bpd, just shy of the December 2022 record high of 13.631 million bpd. Baker Hughes reported an increase of +1 in active US oil rigs, bringing the total to 481 rigs, although numbers still reflect a decline from the four-and-a-half-year high 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
here.
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