Crude Oil and Gasoline Prices Rise Amid Geopolitical Tensions
On Friday, June WTI crude oil (CLM25) closed up by +1.11 (+1.85%), while June RBOB gasoline (RBM25) increased by +0.0230 (+1.10%).
Price Rally Driven by Market Factors
Crude oil and gasoline prices surged to their highest levels in a week. A weaker dollar supported energy prices, and optimism about trade talks with China bolstered crude prices after President Trump announced a trade agreement with the UK. This deal could serve as a model for future agreements. Additionally, the UK is poised to sanction 100 oil tankers part of a fleet aiding Russia, potentially limiting global crude supplies.
Potential Sanctions on Russian Oil
New US sanctions on Russian crude may further restrict global oil availability. Last Thursday, US Senator Graham indicated that he had the backing of 72 senators for a bill mandating severe sanctions on Russia if it does not agree to a ceasefire in Ukraine. This proposal includes imposing a 500% tariff on imports from countries purchasing Russian crude and prohibiting US citizens from buying Russian sovereign debt.
Geopolitical Developments Affecting Prices
Meanwhile, easing geopolitical tensions in the Middle East led to downward pressure on crude prices. President Trump announced the end of the US bombing campaign against Houthi rebels in Yemen following a ceasefire facilitated by Oman. Vice President Vance also noted that a renewed nuclear deal with Iran could reintegrate the nation into the global economy.
OPEC+ Production Decisions Influence Prices
Declines in crude prices were observed earlier in the week, with concerns about a global oil surplus emerging after OPEC+ decided to raise crude production by 411,000 barrels per day (bpd) for June. Saudi Arabia hinted at further similar increases, a strategy likely aimed at curbing oil prices while addressing overproduction issues among OPEC+ members like Kazakhstan and Iraq.
OPEC+ is working to revert the production cuts made over the past two years, gradually restoring a total of 2.2 million bpd. Although production was initially planned to return from January to late 2025, the full restoration will now not occur until September 2026. In April, OPEC’s crude production decreased by 200,000 bpd to 27.24 million bpd.
Negotiations and Global Supply Constraints
The US and Iran reported some progress in discussions regarding Iran’s nuclear program, with plans for further meetings in Europe. An agreement could allow the US to lift export restrictions on Iranian crude, thereby increasing global oil supplies and negatively impacting crude prices.
Inventory Updates and Domestic Production
A decrease in crude oil stored on tankers provides a bullish outlook for prices. Vortexa reported a 14% weekly reduction in crude held on stationary tankers, bringing totals down to 79.84 million barrels as of May 2.
The US government has implemented new sanctions targeting Russia’s oil sector, which could diminish global supplies. Measures aimed at Gazprom Neft and Surgutneftgas, responsible for approximately 970,000 bpd in exports, could reshape market dynamics. Despite sanctions, Russian oil product exports reached a five-month high of 3.45 million bpd in March, although recent data indicated a decline to 3.20 million bpd as of May 4.
The EIA’s report on Wednesday revealed that US crude oil inventories as of May 2 stood 7.3% below the five-year seasonal average. Gasoline inventories were down 3.1%, and distillate inventories decreased by 13.1%. Additionally, US crude oil production fell by 0.7% week-over-week to 13.367 million bpd, still shy of the record high of 13.631 million bpd set in December.
Baker Hughes reported a decrease in active US oil rigs. As of May 9, the count fell by five to 474 rigs, just above the three-and-a-quarter-year low of 472, noted on January 24. The rig count has dropped from the five-year high of 627 rigs recorded in December 2022.
On the date of publication, Rich Asplund did not hold any positions in the mentioned securities. All information is for informational purposes only. For more details, view the Barchart Disclosure Policy here.
The views expressed belong to the author and do not necessarily represent those of Nasdaq, Inc.
