April WTI crude oil (CLJ25) Monday closed down -1.39 (-1.99%), and April RBOB gasoline (RBJ25) closed down -0.0345 (-1.55%).
Crude oil and gasoline prices sold off Monday, with crude falling to a 2-3/4 month low. Crude prices retreated on concern that President Trump's plans to impose tariffs on major US trading partners on Tuesday will weigh on economic growth and energy demand. Losses in crude accelerated Monday after OPEC+ said it would restart some halted crude production in April.
Crude prices came under additional pressure Monday after Bloomberg reported that OPEC+ will restart some halted crude output in April, adding 138,000 bpd to global supplies. It's the first in a series of monthly hikes to revive production halted for over two years, which will gradually restore a total of 2.2 million bpd. OPEC+ had previously planned to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, the completed production increase date was pushed back until September 2026. OPEC Jan crude production fell -700,000 bpd to 27.03 million bpd.
On Tuesday, the Trump administration is set to impose 25% tariffs on US imports from Canada and Mexico and double the new tariff on imports from China to 20%. The tariffs will likely spark retaliation on US exports to Canada, Mexico, and China. The US imports about 4 million bpd of crude from Canada and about 400,000 bpd from Mexico.
Global economic news on Monday was mixed for crude oil demand and prices. On the bearish side, the US Feb ISM manufacturing index fell -0.6 to 50.3, weaker than expectations of 50.7. Also, US Jan construction spending fell -0.2% m/m, slightly weaker than expectations of -0.1% m/m and the biggest decline in 4 months. On the positive side, the China Feb manufacturing PMI rose +1.1 to 50.2, stronger than expectations of 49.9. Also, the Eurozone Feb S&P manufacturing PMI was revised upward by +0.3 to 47.6, stronger than expectations of no change at 47.3.
Crude has support after a Sunday meeting between Iraq and oil companies operating in the Kurdistan region failed to reach an agreement on restarting crude exports due to a dispute over the role of an international consultant to oversee contracts, costs, and payments. The disagreement is delaying the resumption of crude exports from Kurdistan via an oil pipeline through Turkey. Those pipeline shipments of about 185,000 bpd have been shut down for the past two years due to a payment dispute.
Oil prices continue to be undercut by the thaw in US-Russian relations and possible peace talks on the Russia-Ukraine war, which could eventually lead to reduced sanctions on Russia and the full resumption of Russian oil exports.
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. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -130,000 bpd to 3.09 million bpd in the week to February 2. Russian oil production fell to 8.062 million bpd in January, which was -16,000 bpd below its OPEC+ quota.
Crude oil demand in China has weakened and is a bearish factor for oil prices. According to Chinese customs data, China's 2024 crude imports fell -1.9% y/y to 553 MMT. China is the world's biggest crude importer.
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 +6.9% w/w to 73.93 million bbl in the week ended February 28.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of February 21 were -4.3% below the seasonal 5-year average, (2) gasoline inventories were -0.1% below the seasonal 5-year average, and (3) distillate inventories were -7.8% below the 5-year seasonal average. US crude oil production in the week ending February 21 was unchanged w/w at 13.502 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported last Friday that active US oil rigs in the week ending February 28 fell by -2 to 486 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.
