Crude Oil and Gasoline Prices Rise Amid Geopolitical Tensions

April WTI crude oil (CLJ25) closed up +0.68 (+1.02%) on Friday, while April RBOB gasoline (RBJ25) increased by +0.0075 (+0.36%). These price movements reflect a modest gain in energy markets as various factors influenced trading.

Dollar Weakness and Geopolitical Comments Boost Prices

The dollar index (DXY00) fell to a four-month low, providing a supportive backdrop for energy prices. Additionally, President Trump’s statements regarding potential new banking sanctions and tariffs on Russia due to its ongoing actions in Ukraine contributed to the uptick in crude prices. However, gains were capped as Saudi Arabia reduced oil prices for its Asian customers, marking the first price cut from Aramco in three months. The market reacted further when Bloomberg reported that Russia is open to discussing a temporary truce in Ukraine if peace negotiations progress.

Strategic Petroleum Reserve Funding and OPEC Actions

Crude prices found additional support when U.S. Energy Secretary Wright announced plans to seek up to $20 billion to refill the Strategic Petroleum Reserve. This reserve currently holds 395 million barrels but can accommodate a maximum of 700 million barrels. Conversely, the bearish sentiment continued after OPEC+ stated it would restart some halted crude production in April, adding 138,000 barrels per day (bpd) to global supplies.

Production Cuts and Tariffs Affect Market Dynamics

In a related development, the U.S. Treasury Secretary Bessent indicated a willingness to “shut down” Iran’s oil sector to achieve Middle East peace. Moreover, ramped-up Russian oil exports have also been a concern. Recent data from Bloomberg shows that Russian oil product exports in February reached a one-year high of 2.5 million bpd.

On the tariffs front, the Trump administration recently imposed a 25% tariff on imports from Canada and Mexico, while doubling tariffs on China imports to 20%. U.S. energy imports from Canada, including crude oil, were subjected to a lower 10% tariff. This prompted Canada to announce counter-tariffs affecting about C$30 billion ($20.6 billion) worth of U.S. goods, which included plans for additional tariffs on more products shortly.

Gasoline Prices and Inventory Reports

The imposition of a 10% tariff on Canadian energy products has placed upward pressure on gasoline prices as U.S. refiners depend heavily on heavy crude imports from Canada. According to Wednesday’s EIA report, U.S. crude oil inventories as of February 28 were 4.3% below the seasonal five-year average, while gasoline inventories were 1.3% above it. Distillate inventories were 5.5% below the five-year average.

Additionally, Baker Hughes reported that the number of active U.S. oil rigs remained unchanged at 486 for the week ending March 7, still above the three-year low of 472 rigs recorded in January. This marks a notable decline from the four-and-a-half-year high of 627 rigs in December 2022.

Conclusion: Market Outlook

Crude prices face a complex landscape shaped by various geopolitical factors and production dynamics. While bullish indicators, like U.S. tariffs and planned government reserves replenishment, could lend support, ongoing global production increases from OPEC and Russian exports pose significant risks to price stability.

On the date of publication, Rich Asplund did not hold any positions in the mentioned securities. All data is for informational purposes only. For more, view the Barchart Disclosure Policy here.

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