Crude Oil Market Sees Mixed Signals from Global Events
Oil Prices Rise Amid Tensions But Face Pressure from Market Dynamics
March WTI crude oil (CLH25) closed higher on Tuesday, gaining +1.11 to reach +1.57%, while March RBOB gasoline (RBH25) slipped slightly, down -0.0032 (-0.15%).
Prices for crude oil increased following a drone attack on a Russian pumping station, which could potentially impact crude exports from Kazakhstan. Additionally, a Bloomberg report indicated that OPEC+ might delay its scheduled monthly supply increases set to begin in April, offering further support to oil prices.
Conversely, oil futures are facing downward pressure from the possibility of renewed peace talks in the Russia-Ukraine conflict. A successful resolution could lead to the lifting of sanctions on Russia, resulting in a full restoration of its oil exports. Furthermore, a moderate rally in the dollar index added to the bearish outlook for oil prices.
American expectations for stricter sanctions on Iranian oil exports also bolster crude prices. Last week, U.S. Treasury Secretary Bessent announced intentions to cut Iranian oil exports by over 90%. Earlier in February, the U.S. sanctioned an international network instrumental in facilitating the shipment of Iranian crude oil to China.
Support for crude oil came from a report by Politico indicating that European countries may begin seizing Russia’s illegal shadow fleet of oil-exporting tankers in the Baltic Sea. This could be executed through international law on grounds of environmental concerns and piracy. Meanwhile, the U.S. implemented new sanctions on Russia’s oil industry on January 10, targeting significant players such as Gazprom Neft and Surgutneftgas that collectively exported around 970,000 bpd of Russian crude from January to October 2024.
Tracking data from Bloomberg reflected a decline in Russian crude exports, which dropped by -130,000 bpd to 3.09 million bpd as of February 2. Additionally, Russian oil production fell to 8.062 million bpd in January, which was -16,000 bpd under its OPEC+ quota.
China, the world’s largest crude oil importer, reported a decrease in crude demand, contributing to bearish trends in oil prices. According to Chinese customs data, 2024 crude imports declined by -1.9% year-on-year to 553 MMT.
In a further sign of weakening demand, Vortexa noted a rise in crude oil held on stationary tankers for over seven days, which increased by +1.4% week-over-week to 73.77 million barrels for the week ending February 14.
OPEC+ maintained its existing oil production plans during its monthly meeting on February 3, opting to gradually restore crude output starting in April. Plans to restore 2.2 million bpd of output have now been postponed until September 2026, with a significant decrease in January production of -700,000 bpd, dropping to 27.03 million bpd.
According to last Wednesday’s EIA report, U.S. crude inventories as of February 7 were -4.2% below the seasonal five-year average. Gasoline inventories and distillate inventories also revealed deficits at -1.2% and -11.2% below their averages, respectively. U.S. crude oil production rose slightly by +0.1% week-over-week to 13.494 million bpd, remaining below the record peak of 13.631 million bpd set in December.
In the week ending February 14, Baker Hughes reported an increase in active U.S. oil rigs, moving up by +1 to reach 481 rigs. This figure, however, remains well below the high of 627 rigs seen in December 2022, reflecting a longer-term decline in active drilling operations.
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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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