Crude Oil and Gasoline Prices Decline Amid Trade War Concerns

May WTI crude oil (CLK25) closed down -1.12 (-1.85%) on Tuesday, with May RBOB gasoline (RBK25) decreasing by -0.0287 (-1.42%). Energy prices fell moderately, remaining above the significant lows from Monday. Crude oil prices suffered a steep decline to a four-year low on Monday, driven by fears that the escalating global trade war might harm economic growth and decrease energy demand.

On Tuesday, President Trump announced the U.S. plans to impose 50% tariffs on Chinese goods if China does not withdraw the tariffs it has placed on U.S. products. This would raise the total tariffs on Chinese goods to 104%, intensifying the trade tensions.

Tariff concerns continue to exert downward pressure on energy prices, fueling fears that ongoing trade conflicts could disrupt the global economy. China’s Ministry of Commerce responded, labeling the U.S. threats as further escalations and warning that it would vigorously respond if necessary.

Further complications arise as crude prices are also affected by Saudi Arabia’s recent announcement to cut its flagship oil prices by $2.30 per barrel for May deliveries, marking the largest reduction in over two years.

The outlook for crude oil remains pressured following OPEC+’s announcement last Thursday to increase crude production in May by 411,000 barrels per day (bpd), exceeding the +138,000 bpd added this month. OPEC+’s production boost aims to reverse two years of production cuts, gradually restoring a total of 2.2 million bpd. Previously, OPEC+ had planned to restore production between January and late 2025, but this has now shifted, with full restoration not expected until September 2026. OPEC’s crude production climbed by 80,000 bpd in March to reach a 13-month high of 27.43 million bpd.

An increase in global crude oil storage is adding to bearish sentiment. Vortexa reported that crude oil stored on stationary tankers rose by 4.3% week-on-week to 58.56 million barrels as of April 4.

Crude oil found some support when the U.S. Treasury Department’s Office of Foreign Assets Control imposed sanctions on a China-based oil refinery and other entities connected to the transportation of Iranian crude. This move aims to suppress Iranian crude exports amid ongoing tensions. Rystad Energy A/S suggests that these sanctions could potentially remove as much as 1.5 million bpd of Iranian crude from the market, a potential support factor for prices.

Tensions in the Middle East contribute to the complex price environment for crude oil. Israel’s airstrikes across Gaza have reignited military conflict with Hamas, while the U.S. has engaged Houthi rebels in Yemen, indicating a potential for supply disruptions from these regions.

Additionally, recent U.S. sanctions targeting Russia’s oil industry aim to decrease global oil availability. These measures focus on major exporters like Gazprom Neft and Surgutneftgas, which collectively exported approximately 970,000 bpd in early 2024. Despite these sanctions, Russian oil product exports surged to a five-month high of 3.45 million bpd in March.

The market anticipates that Wednesday’s EIA report will show a rise in crude inventories by +2.6 million barrels, while gasoline supplies are predicted to drop by -1.4 million barrels. Last week’s EIA report indicated that U.S. crude oil inventories as of March 28 were 4.6% below the five-year seasonal average, with gasoline inventories up by 2.0% above that average.

Baker Hughes reported a modest increase of five active U.S. oil rigs for the week ending April 4, bringing the total count to a ten-month high of 489 rigs. This marks a recovery from the three-year low of 472 rigs observed on January 24, although the number of oil rigs has declined significantly from December 2022’s peak of 627 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 is solely for informational purposes. For more information, please view the Barchart Disclosure Policy

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