May WTI crude oil (CLK25) Thursday closed up +2.21 (+3.54%), and May RBOB gasoline (RBK25) closed up +0.0554 (+2.71%).
Crude oil and gasoline prices rallied sharply on Thursdays to 1-1/2 week highs. Optimism that the US will be able to make trade deals has reduced tariff concerns and boosted crude prices. President Trump said that US negotiators made “big progress” with Japanese officials on a trade deal and expressed confidence that the US would reach a trade deal with the EU.
Also, doubts that the US will remove export restrictions on Iranian crude oil anytime soon are pushing oil prices higher, dousing some initial optimism earlier this week after US-Iranian officials met to discuss a new nuclear deal. Crude rose Thursday because of concerns that nuclear talks between the US and Iran are not progressing, which reduces the potential of looser restrictions on Iranian crude. US Treasury Secretary Bessent said, “We are prepared to take all actions available to get Iran’s energy exports down to zero, where they belong.”
Stronger crude demand in China, the world’s largest crude importer, supports oil prices. Reuters reported Monday that China Mar crude imports rose to 12.1 million bpd, the highest since August 2023.
Goldman Sachs said Monday that global crude demand is being weighed down by the trade war and increased OPEC+ oil production, leading to “large surpluses” this year and next. Goldman projects the global oil markets will be in a surplus of 800,000 bpd in 2025 and climb to a +1.4 million bpd surplus in 2026.
Crude prices have been on the defensive over the past week and tumbled to a 4-year low last Wednesday. Tariff turmoil is weighing energy prices on concerns about weaker global economic growth and energy demand even after President Trump paused his reciprocal tariffs last Wednesday. Meanwhile, all the other previously announced Trump tariffs remain in place.
Crude prices have a negative carryover from April 3, when OPEC+ said it would boost crude production in May by 411,000 bpd, much more than the +138,000 bpd of crude production it added this month. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production. OPEC+ had previously planned to restore production between January and late 2025, but now that production cut won’t be fully restored until September 2026. OPEC Mar crude production rose +80,000 bpd to a 13-month high of 27.43 million bpd.
An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +0.4% w/w to 65.72 million bbl in the week ended April 11.
Crude oil found support when the US Treasury Department’s Office of Foreign Assets Control on March 20 sanctioned a China-based oil refinery and 19 entities and vessels tied to shipping Iranian crude oil. The US is applying pressure to Iranian crude exports after President Trump recently sent a letter to Iran’s Supreme Leader Ali Khamenei that said Iran has a two-month deadline to reach a new nuclear deal. According to Rystad Energy A/S, a maximum-pressure campaign could remove as much as 1.5 million bpd of Iranian crude exports from global markets, a bullish factor for crude.
Crude prices are being supported by tensions in the Middle East, which could lead to disruption of crude supplies from the region. Israel continues to launch airstrikes across Gaza, ending a nearly two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act “with increasing military strength” to free hostages and disarm Hamas. In addition, the US has launched strikes on Yemen’s Houthi rebels, and Defense Secretary Hegseth said strikes would be “unrelenting” until the group stops attacking vessels in the Red Sea.
In a supportive factor for crude oil prices, the US on January 10 imposed new sanctions on Russia’s oil industry that could curb global oil supplies. The measures targeted Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude in the first 10 months of 2024, accounting for about 30% of its tanker flow, according to Bloomberg data. The US also targeted insurers and traders linked to hundreds of tanker cargoes. Russian oil product exports in March rose to a 5-month high of 3.45 million bpd, according to data compiled by Bloomberg from analytics firm Vortexa. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -40,000 bpd w/w to 3.13 million bpd in the week to April 13.
Wednesday’s EIA report showed that (1) US crude oil inventories as of April 11 were -5.2% below the seasonal 5-year average, (2) gasoline inventories were -0.9% below the seasonal 5-year average, and (3) distillate inventories were -10.2% below the 5-year seasonal average. US crude oil production in the week ending April 11 was unchanged w/w to 13.462 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported Thursday that active US oil rigs in the week ending April 18 rose +1 to 481 rigs, moderately above the 3-year low of 472 rigs posted on January 24. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
