Crude Oil Prices Rise Moderately Amid Trade and Supply Concerns

June WTI crude oil (CLM25) closed on Friday up +0.23 (+0.37%), while June RBOB gasoline (RBM25) increased by +0.0109 (+0.52%).

Market Influences on Crude Oil Prices

Crude oil and gasoline prices saw moderate gains on Friday, driven primarily by renewed hopes for a resolution in the US-China trade war. Bloomberg reported that the Chinese government might suspend the 125% tariffs on several US imports, including medical equipment and industrial chemicals like ethane. However, a stronger dollar limited the overall gains. Additionally, President Trump’s firm stance on tariffs raised concerns that tensions might continue, potentially impacting economic growth and energy demand. He stated that the US would not reduce tariffs without substantive concessions from China.

Refining Activity and Crack Spread Support

The strength in the crude crack spread offered support to crude prices. The crack spread reached a 2-1/2 week high on Friday, incentivizing refiners to increase crude purchases and produce more gasoline and distillates.

Supply Concerns from OPEC+ and Member Nations

Despite these positive indicators, worries about oversupply persisted. Reuters reported that several OPEC+ members are likely to propose further output increases in June, marking the second month in a row. Kazakhstan’s energy minister also indicated that the country would not cut production, prioritizing national interests over OPEC+ agreements, which could provoke a reaction from Saudi Arabia. If Saudi Arabia responds by boosting production to lower prices, this could further flood the market with crude. A meeting among OPEC+ members is set for May 5 to discuss output strategy for June.

Impact of Geopolitical Tensions and US-Iran Relations

Recent discussions about a potential US-Iran nuclear deal have placed additional pressure on crude oil prices. Iran’s foreign minister commented on achieving a “better understanding” with the US after recent talks regarding the nuclear program.

Stock Levels and Market Trends

Global crude oil storage levels also hint at bearish conditions. Vortexa noted a 19% week-over-week increase in crude oil stored on stationary tankers, reaching 78.19 million barrels as of April 18, the highest level in eight months.

Historical Price Trends and Demand from China

Crude prices, having faced challenges this month, hit a four-year low on April 9, largely due to tariff uncertainties that raised concerns about global economic growth and energy demand. Notably, while President Trump has paused some tariffs, existing ones remain in place. On a positive note, stronger crude demand from China, the largest importer in the world, offers support. Reports indicated that China’s crude imports in March reached 12.1 million barrels per day, the highest since August 2023.

OPEC+ Production Decisions and Outlook

OPEC+ plans to increase production significantly in May, with a boost of 411,000 barrels per day, far exceeding April’s increase of 138,000 barrels per day. The group has shifted its timeline for restoring production levels, postponing full restoration until at least September 2026, compared to a previous goal set between now and late 2025. March production figures indicated an increase to 27.43 million barrels per day, up by 80,000 barrels from prior month levels.

US Sanctions and Middle Eastern Tensions

US sanctions targeting Iran and tensions in the Middle East should also be factored into market dynamics. On March 20, the US Treasury Department sanctioned a China-based oil refinery connected to Iranian crude shipments. This move aims to pressure Iran, especially after President Trump issued a two-month deadline for a new nuclear agreement. Analysts from Rystad Energy suggested that these sanctions could decrease Iranian exports by as much as 1.5 million barrels per day, which would positively influence global crude prices.

Russian Crude and US Production Updates

As for Russia, new US sanctions have targeted its oil industry, potentially restricting global supplies. Measures imposed in January affected major players like Gazprom Neft and Surgutneftgas, which produced around 970,000 barrels per day in 2024. However, recent reports noted a resurgence in Russian oil exports, indicating rising activity in this sector.

US Oil Rig Count and Production Levels

According to the latest data from the EIA, as of April 18, US crude oil inventories remain 5.3% below the seasonal five-year average. Gasoline inventories and distillate stocks also reflect declines. While US crude production held steady at 13.46 million barrels per day, the Baker Hughes report highlighted an increase in active US oil rigs, rising by two to a total of 483, slightly above a recent low of 472 rigs.

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.

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