On Friday, July WTI crude oil closed down $1.54 (-1.73%) at a 5-week low, while July RBOB gasoline fell $0.0665 (-2.14%). This decline is largely attributed to tentative discussions between the U.S. and Iran on extending a ceasefire by 60 days, which raises hopes for the reopening of the crucial Strait of Hormuz, through which about 20% of the world’s oil transits. Goldman Sachs indicates that crude output in the Persian Gulf has already been curtailed by 14.5 million barrels per day (bpd), resulting in nearly 500 million barrels drawn down from global crude stockpiles.
The International Energy Agency (IEA) reported that global oil inventories have dropped by approximately 4 million bpd, and warned of severe undersupply until October even if the conflict resolves soon. Furthermore, OPEC’s crude production fell to a 35-year low of 20.55 million bpd in April, amidst ongoing geopolitical tensions, including the continued war between Russia and Ukraine, which has hampered Russian crude exports and further strained global oil supplies.
As of May 22, U.S. crude oil inventories were 2.0% below the seasonal 5-year average, with gasoline inventories down 5.5% and distillates down 10.8%. The number of active U.S. oil rigs reached an 11-month high of 429 rigs, reflecting a slight recovery from record lows.
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