April WTI crude oil (CLJ26) closed at +9.89 (+12.21%) on Friday, and April RBOB gasoline (RBJ26) +0.0757 (+2.83%).
Crude oil and gasoline prices extended this week’s fastest rally on Friday, with crude oil posting near-future highs of 2.5 years and gasoline posting a 1.75-year high. The ongoing war in the Middle East entered the seventh day on Friday without any agreement. The Strait of Hormuz remains blocked, blocking most energy transfers from the Persian Gulf.
Crude oil gains accelerated on Friday after Qatar’s energy minister told the Financial Times that war in the Middle East could “damage the global economy” and predicted that all Gulf energy exporters would shut production within weeks, pushing crude prices to $150 a barrel.
President Trump’s comments on Friday also boosted crude oil prices when he said the United States was not willing to negotiate an end to the war with Iran, and that “there will be no deal with Iran unless it surrenders,” fueling concerns that the U.S. may be preparing for a protracted war.
The closure of the Strait of Hormuz halted most energy shipments from the Persian Gulf and boosted energy prices. Iran’s Islamic Revolutionary Guard Corps has warned ships to avoid the crossing, saying ships “may be at risk from missiles and drones.” The closure of the Strait of Hormuz, which handles a fifth of the world’s oil, has forced Gulf producers to export their oil to store crude in storage tanks. Iraq and Saudi Arabia, OPEC’s biggest producers, have curbed oil production as curbs on their exports fill their oil storage facilities. Goldman Sachs estimates the real-time risk premium for crude oil at $18/bbl, assuming the impact of a six-week total shutdown on oil traffic in the Strait of Hormuz.
Also, the downing of an intercepted Iranian drone on Tuesday caused a huge fire in the UAE’s main oil trading hub, Fujairah, one of the largest oil storage hubs in the Middle East. In addition, Iranian drone strikes forced Saudi Arabia to close the Ras Torah refinery, the country’s largest, which refines 550,000 bpd of crude oil.
As an emergency factor for crude oil, OPEC+ said on Sunday that it will increase crude oil production by 206,000 bpd in April, above the estimate of 137,000 bpd. OPEC+ is trying to restore all production of the 2.2 million bpd it committed to by early 2024, but still has about 1.0 million bpd left to restore. OPEC’s January crude output fell -230,000 bpd to a 5-month low of 28.83 million bpd.
Rising crude supplies in past stocks are a downward pressure factor on oil prices. According to data from Vortexa, there are currently about 290 million barrels of Russian and Iranian crude oil in tankers, which is 50% more than last year, due to sanctions and embargoes on Russian and Iranian crude oil. Vortexa reported on Monday that crude oil stored in tankers that were idle for at least 7 days rose +20% w/w/w to 105.48 million bbl in the week ended February 27.
Increased crude exports from Venezuela are also boosting global oil supplies and lower prices. Reuters reported on February 9 that Venezuela’s crude exports rose to 800,000 bpd in January from 498,000 bpd in December.
On February 10, the EIA raised its 2026 US crude production forecast to 13.60 million bpd from 13.59 million bpd last month, and raised its 2026 US energy consumption forecast to 96.00 (quadrillion btu) from 95.37 last month. The IEA last month cut its 2026 global crude oil surplus estimate to 3.7 million bpd from last month’s estimate of 3.815 million bpd.
The latest US-brokered meeting in Geneva to end the war between Russia and Ukraine ended after Ukrainian President Zelensky accused Russia of having a hand in prolonging the war. Russia has said that there is no solution to the “territory issue” with Ukraine, and that there is “no hope of achieving a long-term settlement” of the conflict unless Russia’s demands for territory in Ukraine are accepted. The prospect of continued Russian-Ukrainian conflict will keep Russian crude oil restrictions in place and boost oil prices.
Ukraine’s drone and missile attacks have targeted at least 28 Russian refineries over the past seven months, limiting Russia’s ability to export crude oil and reducing global oil supplies. Also, since the end of November, Ukraine has stepped up attacks on Russian tankers in the Baltic Sea, with at least six tankers attacked by drones and missiles. In addition, new US and EU sanctions on Russian oil companies, infrastructure and tankers have limited Russian oil exports.
Wednesday’s EIA report showed that (1) U.S. crude oil inventories as of February 27 were -2.7% below the 5-year seasonal average, (2) gas oil inventories were +4.4% above the 5-year seasonal average, and (3) distillate inventories were -1.9% below the 5-year seasonal average. U.S. crude oil production was unchanged at 13.696 million bpd in the week ended Feb. 27, down from a record high of 13.862 million bpd from the week of Nov. 7.
Baker Hughes reported on Friday that the number of active US oil rigs rose +4 to 411 rigs in the week ended March 6, just above the 4.25-year low of 406 rigs posted in the week ended December 19. Over the past 2.5 years, the number of US oil rigs has fallen sharply, according to a report in December 27 -56. 2022.
As of the date of publication, Amir Espland had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
