April WTI crude oil (CLJ26) closed at +3.87 (+4.26%) on Monday, and April RBOB gasoline (RBJ26) +0.0618 (+2.25%). April WTI crude fell to a 3.75-year near-term high of $119.48 on Monday but then retreated to $94.77.
Crude oil and gasoline prices rose on Monday after Israel bombed 30 Iranian oil depots on Saturday. In addition, Saudi Arabia has become the latest Middle Eastern oil producer to curb production as local oil storage facilities near capacity.
Oil prices pulled back from sharp gains after a meeting of G7 finance ministers said they were ready to coordinate the release of strategic oil supplies, but that the release was not yet necessary. “We are ready to take the necessary measures, including supporting the world’s energy supply such as the release of reserves,” it said in a statement.
Meanwhile, there is no end in sight to the Middle East conflict as Iran’s Council of Experts over the weekend elected hardliner Mojtaba Khamenei, the son of Ayatollah Ali Khamenei, as Iran’s new supreme leader. Iran’s new leader has close ties to Iran’s powerful Islamic Revolutionary Guard Corps (IRGC). President Trump has said he is “not happy” with Iran’s new leader.
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. 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.
As an emergency factor for crude oil, OPEC+ said on March 1 that it would increase crude oil production by 206,000 bpd in April, above an estimate of 137,000 bpd, although an increase in output now appears unlikely as Middle Eastern producers are forced to cut production due to the Middle East conflict. 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 standing for at least 7 days fell -21% w/w to 88.80 million bbl in the week ended March 6.
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.
Last 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) natural gas 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 last 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 that ended December 19. Over the past 2.5 years, the number of US oil rigs has fallen sharply at 56 -57 in December. 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
