Crude Oil and Gasoline Prices Slip on Monday’s Trading

February WTI crude oil (CLG25) closed down -0.40 (-0.54%) on Monday, while February RBOB gasoline (RBG25) fell by -0.0182 (-0.89%).

Market Dynamics Shift as Oil Prices Retreat

On Monday, both crude oil and gasoline prices slipped from earlier gains, experiencing moderate losses. The inability of crude futures to surpass $75 a barrel led to long liquidation pressure.

Initial Gains Supported by Weak Dollar and Tariff Expectations

Initially, crude prices rose, achieving a 2.5-month high, while gasoline reached a 1.5-month peak. The weaker dollar gave a boost to energy prices. A report from the Washington Post indicated that President-elect Trump was considering limiting tariffs, suggesting a less adverse impact on global trade than previously anticipated.

Saudi Arabia Adjusts Pricing Amid Concerns of Tighter Supply

Further support for crude prices came as Saudi Arabia raised its prices for Asian customers by 60 cents per barrel for February deliveries, surpassing expectations of just 10 cents. This indicates tighter supply conditions in one of their largest export markets.

Decrease in Global Crude Storage Indicates Price Support

Vortexa reported a significant decline of 33% in crude oil held on stationary tankers, dropping to 48.02 million barrels during the week ending January 3. This reduction is a positive sign for oil prices.

Sanctions Looming Over Iranian and Russian Exports

The potential for new sanctions on Iranian and Russian crude exports remains a concern that could curtail global oil supplies. Mike Walz, Trump’s choice for national security adviser, pledged a return to a stringent “maximum pressure” policy on Iran, while the Biden administration is contemplating harsher sanctions on Russian oil.

OPEC+ Adjusts Production Plans Amid Market Pressures

Crude prices were bolstered last month when OPEC+ postponed a planned increase in crude production by 180,000 barrels per day (bpd) from January to April and decided to unwind production cuts more gradually. Additionally, the UAE announced it would delay its planned increase of 300,000 bpd from January to April, pushing back OPEC’s overall output restoration until September 2026.

Demand Weakness in China Affects Prices

China’s crude oil demand has weakened, acting as a bearish factor for oil prices. Bloomberg’s data revealed that apparent oil demand fell by 2.14% year-over-year in November to 14.013 million bpd, with a cumulative decrease of 3.26% for the year-to-date figures.

Russian Export Decline Offers Some Support

Conversely, a decline in Russian crude exports provides some support to the market. Recent data showed a reduction of 170,000 bpd, bringing exports down to 2.97 million bpd as of December 15.

US Inventory Levels Show Mixed Signals

The EIA’s report last Thursday highlighted that US crude oil inventories as of December 27 were 5.3% below the seasonal five-year average. However, gasoline inventories were only slightly lower, at 0.4% below average, while distillate inventories dropped by 5.9% below the average. The US crude production for the week ending December 27 dipped by 0.1% to 13.573 million bpd, marginally below the record high of 13.631 million bpd from December 6.

Active US Oil Rigs Continue to Decline

Last Friday’s Baker Hughes report showed that active US oil rigs fell by one to 482 rigs, slightly above the 2.75-year low of 477 rigs from November 29. The count of US oil rigs has decreased from a 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. All information and data are for informational purposes only. For more details, please view the Barchart Disclosure Policy here.

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