March WTI crude oil (CLH25) Friday closed down -0.20 (-0.27%), and March RBOB gasoline (RBH25) closed down -0.0067 (-0.32%).
Crude and gasoline prices settled moderately lower on Friday, with crude posting a 4-week low. Friday’s rally in the dollar index (DXY00) to a 1-week high undercut energy prices. Crude prices also came under pressure after a tanker departed Russia’s Ust-Luga port with crude Friday, suggesting limited impact from Ukraine’s drone strike on the facility. Limiting losses in crude oil is a concern about a possible +25% tariff on Canadian and Mexican goods starting Saturday that could curb US crude supplies, with Canada and Mexico being the two largest exporters of crude oil to the US.
The resumption of Russian crude exports from the Baltic Sea port of Ust-Luga is bearish for oil prices. The port had suspended operations on Wednesday due to damage from Ukrainian drone strikes. Ust-Luga handles about 650,000 bpd of crude, accounting for 20% of Russia’s total seaborne crude exports.
Crude has support from expectations for the US to impose tariffs of 25% on Canadian and Mexican goods on Saturday. More than half of US crude imports come from Canada, and Mexico is the second largest crude exporter to the US.
Crude prices have a negative carryover from last Friday when President Trump reiterated his call for OPEC “to cut the price of oil,” saying a decline in crude prices could starve Russia of revenue and put an end to the war in Ukraine. OPEC+ will discuss its crude production plans when it meets Monday.
An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +13% w/w to 66.26 million bbl in the week ended January 24.
Crude prices saw support on January 10 when the US imposed new sanctions on Russia’s oil industry that could curb global oil supplies. The measures targeted Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude in the first 10 months of 2024, accounting for about 30% of its tanker flow, according to Bloomberg data. The US also targeted insurers and traders linked to hundreds of tanker cargoes.
A decline in Russian crude oil exports is supportive of crude oil prices. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -260,000 bpd to 2.75 million bpd in the week to January 19.
The outlook for new sanctions on Iranian and Russian crude exports could limit global oil supplies and is bullish for prices. President Trump’s national security adviser, Mike Walz, vowed a return to “maximum pressure” on Iran. Last Thursday, US Treasury Secretary Bessent said he would be “100% on board for taking sanctions up,” especially on Russian oil majors.
Crude found support last month after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Dec crude production fell -120,000 bpd to 27.05 million bpd.
Crude oil demand in China has weakened and is a bearish factor for oil prices. According to Chinese customs data, China’s 2024 crude imports fell -1.9% y/y to 553 MMT. China is the world’s biggest crude importer.
Wednesday’s EIA report showed that (1) US crude oil inventories as of January 24 were -5.6% below the seasonal 5-year average, (2) gasoline inventories were -0.3% below the seasonal 5-year average, and (3) distillate inventories were -8.7% below the 5-year seasonal average. US crude oil production in the week ending January 24 fell -1.8% w/w to 13.24 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported Friday that active US oil rigs in the week ending January 31 rose by +7 to 479 rigs, rebounding from the prior week’s 3-year low of 472 rigs. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted 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.
More news from Barchart
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
