Crude Oil and Gasoline Prices Hit Three-Week Lows Amid Trade Tensions
On Friday, July WTI crude oil (CLN25) closed down -0.15 (-0.25%), while July RBOB gasoline (RBN25) fell -0.0221 (-1.08%).
Crude and gasoline prices reached three-week lows due to a stronger dollar and escalating trade tensions between the U.S. and China, both major crude consumers. According to Reuters, OPEC+ is contemplating a production boost for July exceeding the previously agreed increase of +411,000 barrels per day (bpd).
Supported by potential production disruptions, crude losses were somewhat mitigated after Libya’s government threatened to halt oil production and exports due to militia activity at its state oil headquarters. Citigroup estimates that a complete shutdown could remove up to 600,000 bpd from global markets.
Additionally, a report from Baker Hughes indicated that U.S. active oil rigs fell to a 3.5-year low, suggesting a tighter production outlook that could benefit oil prices. Weakness in the crude crack spread, which dropped to a 1.5-month low, has discouraged refiners from purchasing crude oil for processing into gasoline and distillates.
Further impacting crude prices, U.S. Treasury Secretary Bessent noted that trade discussions with China remain stalled, and President Trump has accused China of violating tariff agreements. Such tensions may result in sluggish economic growth and reduced crude demand.
Concerns over a global oil glut linger, as OPEC+ is evaluating a production increase for July during its upcoming May 31 meeting. This follows a prior agreement for a similar increase in June. The entity is gradually restoring a total of 2.2 million bpd of output, delaying the complete restoration of pre-pandemic levels until September 2026.
On the geopolitical front, statements from Iranian Supreme Leader Ali Khamenei suggest that a nuclear deal with the U.S. is unlikely. Concerns about Iranian oil supplies may support crude prices, especially following U.S. sanctions targeting an operation that facilitated Iranian oil shipments to China.
Barely shifting global supplies may also be supported by U.S. sanctions on Russia’s oil industry, with Russian crude exports falling by -90,000 bpd to 3.4 million bpd in mid-May.
The EIA’s latest report showed U.S. crude oil inventories as of May 23 were -6.2% below the seasonal five-year average. The report also highlighted gasoline inventories were -3.1% below the five-year average, and distillate inventories were -17.4% below the same period averages. U.S. crude oil production rose by +0.1% to 13.401 million bpd but remains shy of December’s record high.
Baker Hughes reported a decline of four active U.S. oil rigs, dropping to a total of 461, which is the lowest level in 3.5 years and significantly down from December 2022’s peak of 627 rigs.
On the date of publication, Rich Asplund did not hold positions in any of the mentioned securities. All information is for informational purposes. For more details, see the Barchart Disclosure Policy here.
More news from Barchart
The views expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.
