Oil Prices Fall Amid Mixed Signals and Trade Concerns

May WTI crude oil (CLK25) closed down -0.20 (-0.33%) on Tuesday, while May RBOB gasoline (RBK25) increased by +0.0022 (+0.11%).

Mixed Settlements in Crude and Gasoline Prices

On Tuesday, crude oil and gasoline prices displayed mixed outcomes. A stronger dollar exerted downward pressure on crude prices. Furthermore, the International Energy Agency (IEA) cut its global crude demand forecast, contributing to the decline in prices. Concerns over U.S. tariffs potentially escalating into a global trade war, undermining economic growth and energy demand, further weighed on crude prices.

Trade War Concerns Persist

Ongoing fears that U.S. tariffs may trigger a global trade war are casting a bearish outlook on crude prices. During recent trade talks, limited progress was made between the EU and the U.S., and the Trump administration has confirmed that most tariffs on the bloc will remain. Moreover, Bloomberg reported on Tuesday that China has ordered its airlines to halt further deliveries of Boeing jets, adding to the tension.

IEA Cuts Demand Forecast

Crude prices took a hit following the IEA’s announcement of a 300,000 bpd reduction in its 2025 global crude demand forecast, lowering it to 730,000 bpd from 1.03 million bpd. The IEA stated that 2026 global crude consumption would also slow to 690,000 bpd, citing a “fragile macroeconomic environment.”

Chinese Demand Provides Support

Despite the bearish outlook from the IEA, stronger crude demand from China, the world’s largest importer, provides some support for prices. Reuters reported that China’s crude imports rose to 12.1 million bpd in March, marking the highest level since August 2023.

US-Iran Nuclear Talks Affect Market Sentiment

Recent discussions between U.S. and Iranian negotiators regarding nuclear agreements raised the possibility of easing export restrictions on Iranian crude, contributing to a bearish scenario for oil prices. Reports indicated that these talks were “constructive,” with both parties planning to reconvene in a week.

Goldman Sachs Forecasts Oversupply

Goldman Sachs emphasized on Monday that global crude demand is hindered by the ongoing trade war and increased OPEC+ oil production, predicting “large surpluses” for 2025 and 2026. The firm estimates an 800,000 bpd global oil market surplus in 2025, escalating to a 1.4 million bpd surplus in 2026.

Continuous Downward Pressure on Prices

Crude prices have been under pressure, recently falling to a four-year low last Wednesday. Concerns regarding tariffs contribute to declines in energy prices amid fears of reduced global economic growth and energy demand, despite President Trump pausing reciprocal tariffs last week.

OPEC+ Production Adjustments

Adding to the negative outlook, OPEC+ has signaled a boost in crude production, set to increase by 411,000 bpd in May, significantly exceeding the +138,000 bpd anticipated for this month. The coalition is working to unwind years of production cuts, with plans to gradually restore 2.2 million bpd by September 2026. OPEC’s crude production for March reached a 13-month high of 27.43 million bpd, gaining +80,000 bpd.

Bearish Trends in Stored Oil

The volume of crude oil stored on tankers also indicates bearish trends for prices. Vortexa reported that crude stored on tankers stationary for at least seven days rose by +0.4% week-over-week to 65.72 million bbl as of April 11.

Sanctions and Tensions Support Prices

Support for crude prices has emerged from tensions in the Middle East, which threaten supply stability. In recent developments, Israel has resumed airstrikes on Gaza, concluding a ceasefire with Hamas, and U.S. strikes are additionally targeting Houthi rebels in Yemen, as stated by Defense Secretary Hegseth.

Impact of U.S. Sanctions on Russia

The U.S. imposed new sanctions on Russia’s oil industry on January 10, potentially curbing global oil supplies. In March, Russian oil product exports rose to a five-month high of 3.45 million bpd, even as measures target key players in its oil sector, raising questions about future market dynamics.

EIA Information and Analysis

Wednesday’s expected EIA report shows crude inventories increasing by +390,000 bbl while gasoline supplies are forecasted to decrease by -1.8 million bbl. Last week’s EIA data indicated that as of April 4, U.S. crude inventories were -5.2% below the seasonal five-year average, gasoline inventories were +0.4% above it, and distillate inventories were -8.9% below.

Additionally, U.S. crude production fell -0.9% week-over-week to 13.458 million bpd, slightly below the record high of 13.631 million bpd recorded in December. Baker Hughes reported a decline of -9 active U.S. oil rigs to 480, which remains above the three-year low of 472 rigs recorded earlier this year. Over the past two years, the number of U.S. oil rigs has diminished from a peak of 627 rigs 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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