April WTI crude oil (CLJ25) Tuesday closed down -0.68 (-1.01%), and April RBOB gasoline (RBJ25) closed down -0.0128 (-0.59%).
Crude oil and gasoline prices Tuesday retreated from 2-week highs and settled moderately lower. Crude prices gave up early gains Tuesday and turned lower after Russian President Putin committed to limit Russian attacks on Ukrainian energy infrastructure for 30 days. Crude prices Tuesday initially moved higher on ramped up tensions in the Middle East after Israel launched a series of airstrikes across Gaza. Also, the US is launching strikes against Houthi Rebels in Yemen for attacking shipping in the Red Sea. Today's slump in the dollar index (DXY00) to a 5-month low and stronger-than-expected global economic news were also supportive for crude prices.
Crude prices have support from rising tensions in the Middle East, which could lead to disruption of supplies from the region. Israel launched a series of airstrikes across Gaza today, 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. The US is also launching 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.
Tuesday's global economic news was supportive for energy demand and crude prices. US Feb housing starts rose +11.2% m/m to 1.501 million, stronger than expectations of 1.385 million. Also, US Feb manufacturing production rose +0.9% m/m, stronger than expectations of +0.3% m/m and the biggest increase in a year. In addition, the German Mar ZEW survey expectations of economic growth rose +25.6 to a 3-year high of 51.6, stronger than expectations of 48.3.
A bearish factor for crude was Sunday's action by Goldman Sachs to cut its year-end WTI crude price forecast to $67 a barrel from $72 and lower its 2025 global oil demand forecast by 18% to 900,000 bpd, citing a slowing global economy from tariffs and the OPEC+ plan to increase production.
Also weighing on crude prices is concern that US tariffs and retaliatory tariffs will curb global growth and undercut energy demand.
Ramped-up Russian oil exports are negative for crude prices after data compiled by Bloomberg from analytics firm Vortexa showed Russian Feb oil products exports reached a 1-year high of 2.5 million bpd.
Crude prices were undercut when OPEC+ said on March 3 that it would restart some halted crude output in April, adding 138,000 bpd to global supplies. That is the first of a series of monthly hikes to reverse the 2-year-long production cut, which will gradually restore a total of 2.2 million bpd. 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 Feb crude production rose +320,000 bpd to a 14-month high of 27.35 million bpd.
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 -30,000 bpd to 3.45 million bpd in the week to March 16.
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.
A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -20% w/w to 60.89 million bbl in the week ended March 14.
The consensus is that Wednesday's weekly EIA crude inventories will climb +1.0 million bbl, and gasoline supplies will fall -1.4 million bbl.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of March 7 were -5.1% below the seasonal 5-year average, (2) gasoline inventories were +1.3% above the seasonal 5-year average, and (3) distillate inventories were -4.8% below the 5-year seasonal average. US crude oil production in the week ending March 7 rose +0.5% w/w to 13.575 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 March 14 rose +1 rig to 487 rigs, mildly 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.
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 here.
