Crude Oil Prices Decline Amid Economic and Trade Concerns

April WTI crude oil (CLJ25) closed down -1.13 (-1.67%) on Thursday, while April RBOB gasoline (RBJ25) fell by -0.0170 (-0.79%).

Crude oil prices faced downward pressure on Thursday, ending the day lower. A stronger dollar contributed to a bearish sentiment in energy markets. Additionally, the potential for increased US tariffs added to market concerns; President Trump indicated he might impose a 200% tariff on European wine, champagne, and other alcoholic beverages unless the EU lifts a tax on American whiskey. This looming trade conflict could negatively affect growth and, subsequently, energy demand.

Further compounding the uncertainty, the International Energy Agency (IEA) revised its global crude demand forecast for the year downward. The report noted a possible global crude surplus, which intensified losses for crude prices, especially as the S&P 500 index hit a six-month low, undermining confidence in energy demand. However, some encouraging global economic reports helped to limit the decline in crude oil prices.

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On the same day, IEA announced a downward adjustment of approximately 100,000 barrels per day (bpd) for its 2025 global crude consumption forecast, now expecting about 1 million bpd. The agency also projected a global crude surplus this year of 600,000 bpd, which could widen by 400,000 bpd due to OPEC+’s decision to resume some halted crude output.

Despite these factors, certain economic indicators provided some support for crude oil prices. For instance, US weekly initial unemployment claims unexpectedly decreased by 2,000 to 220,000, contrasting earlier predictions of an increase to 225,000. In the Eurozone, January industrial production rose by 0.8% month-on-month, outperforming expectations of a 0.6% increase—the most significant rise in five months.

Moreover, last week’s comments from US Energy Secretary Wright, who noted plans to seek up to $20 billion to replenish the Strategic Petroleum Reserve—which currently holds 395 million barrels out of a maximum capacity of 700 million—provided additional medium-term support for crude prices.

Crude also finds backing from recent statements by Treasury Secretary Bessent regarding efforts to significantly impact Iran’s oil sector, aiming for regional stability.

Conversely, increasing Russian oil exports pose a negative factor for crude prices. Data from Bloomberg, sourced from analytics firm Vortexa, highlighted that Russian oil products exports reached a one-year peak of 2.5 million bpd in February.

Additionally, OPEC+’s announcement to restart some halted crude output—adding 138,000 bpd to global supplies starting in April—broke the momentum of crude prices. This marked the initial monthly uptick in a plan to reverse a two-year-long production cut, with a gradual restoration projected to total 2.2 million bpd. While OPEC aimed to restore production by early 2025, the full recovery now extends to September 2026. OPEC’s February crude production rose by 320,000 bpd to a 14-month high of 27.35 million bpd.

However, the US imposed new sanctions on Russia’s oil industry on January 10, which may restrict global oil supplies. These sanctions targeted Gazprom Neft and Surgutneftgas, both of which exported approximately 970,000 bpd of Russian crude in the first ten months of 2024, amounting to about 30% of Russia’s tanker flow, according to Bloomberg. Tracking data indicates a drop in Russian crude exports by 45,000 bpd to 3.48 million bpd in the week ending March 9.

A notable bearish signal for oil prices is the decline in crude oil demand from China. Recent customs data revealed that China’s crude imports fell by 1.9% year-on-year to 553 million metric tons, making it the world’s largest crude importer.

Furthermore, a rise in crude oil stored on stationary tankers worldwide is another negative indicator. Vortexa reported a 4.9% week-on-week increase, totaling 84.15 million barrels as of the week ending March 7.

The EIA’s report from Wednesday noted several key details: (1) US crude oil inventories as of March 7 were 5.1% below the five-year seasonal average, (2) gasoline inventories were 1.3% above the seasonal average, and (3) distillate inventories fell by 4.8% below the five-year seasonal benchmark. US crude oil production slightly increased by 0.5% week-on-week to 13.575 million bpd, remaining just below the record high of 13.631 million bpd from the week of December 6.

Lastly, Baker Hughes reported that the number of active US oil rigs was unchanged at 486 for the week ending March 7, moderately above the three-year low of 472 rigs recorded on January 24. This figure represents 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 hold any positions in the securities mentioned in this article, either directly or indirectly. All information and data in this article are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

 

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