Oil Prices Show Slight Upward Movement Amid Mixed Factors
Market Overview: March WTI crude oil (CLH25) has increased by +0.05 (+0.07%), while March RBOB gasoline (RBH25) is up by +0.0088 (+0.43%).
Crude and gasoline prices have edged higher as they stabilize after reaching two-week lows on Monday. A tight global crude supply outlook continues to support prices. Yet, the rise is limited due to the strength of the dollar and potential tariff threats from President Trump, which could lead to a trade war, impacting global growth and energy demand.
Recent actions by Bank of America to lower its 2025 global crude surplus estimate have provided support for crude prices. The bank revised its projection down to 100,000 barrels per day (bpd) from 750,000 bpd, citing U.S. sanctions against Russia, a tough stance on Iran and Venezuela, and OPEC+’s decision to postpone production increases.
The economic landscape shifted with comments from President Trump. He hinted at considering tariffs across various sectors, which raises concerns about potential economic slowdowns that could reduce crude demand. Additionally, he recently pressured OPEC to lower oil prices to impact Russia’s revenue and potentially end the war in Ukraine.
Bearish signals for oil prices come from an increase in crude oil stored on stationary tankers. Vortexa reported a +13% week-on-week rise in crude held on tankers as of January 24, amounting to 66.26 million barrels.
Support for crude prices can be found in the U.S. sanctions imposed on Russia’s oil industry on January 10. These sanctions particularly targeted Gazprom Neft and Surgutneftgas, which accounted for approximately 970,000 bpd of Russian crude exported in the first ten months of 2024, representing about 30% of its tanker flow, according to Bloomberg data.
The situation regarding Russian crude exports appears to bolster oil prices. Weekly data from Bloomberg indicated a decrease in Russian crude exports, which fell by -260,000 bpd to 2.75 million bpd as of January 19.
Expectations of new sanctions against Iranian and Russian crude exports add a bullish perspective to oil prices. Trump’s national security adviser, Mike Walz, has expressed a commitment to reinstating “maximum pressure” on Iran. Recently appointed Treasury Secretary Bessent also indicated strong support for increased sanctions, particularly targeting Russian oil companies.
Further support for crude prices was seen last month when OPEC+ postponed a planned production hike of +180,000 bpd from January to April. They also announced a slower unwinding of their output cuts, while the UAE indicated it would delay a 300,000 bpd increase in its production targets until April. OPEC+ has deferred its plan to restore 2.2 million bpd of output until September 2026, with December production down by -120,000 bpd to 27.05 million bpd.
Weakening crude oil demand from China raises concerns for oil prices. Data shows that China’s crude imports fell by -1.9% year-on-year to 553 million metric tons in 2024, reflecting its position as the world’s largest crude importer.
According to last Thursday’s EIA report, U.S. crude oil inventories were -6.4% below the seasonal five-year average as of January 17, gasoline inventories were -0.7% below, and distillate inventories were -5.7% below this average. U.S. crude oil production remained steady at 13.477 million bpd, slightly below the record high of 13.631 million bpd recorded the week of December 6.
Baker Hughes reported a decrease in active U.S. oil rigs, which fell by -6 to a three-year low of 472 rigs as of January 24. The number of active rigs has decreased over the past two years from a level of 627, a 4-1/2 year high posted in December 2022.
On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information and data in this article is intended solely for informational purposes. Please view the Barchart Disclosure Policy for more details.
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