April WTI crude oil (CLJ26) is down -0.55 (-0.74%) today, and April RBOB gasoline (RBJ26) is up +0.0172 (+0.70%).
Crude oil and gasoline prices were mixed today, with gasoline hitting a 19.5-month high. Energy prices are volatile today, driven by headlines. Crude oil prices fell earlier today after a New York Times report said Iranian activists had offered the United States to discuss terms to end the conflict. However, prices rose after Iran denied the report. Crude prices fell again in the twelfth-week EIA inventory report.
Crude oil took a slightly negative turn on Tuesday, when President Trump said the United States would guarantee the free flow of energy through the Strait of Hormuz with insurance guarantees and even seahorses.
The closure of the Strait of Hormuz is a spike in energy prices. Iran’s Islamic Revolutionary Guard Corps said “we will fire any ship that tries to cross” the strait, which runs off Iran’s coast and handles a fifth of the world’s oil. The closure of the Strait of Hormuz forced Iraq, OPEC’s second-biggest producer, to shut down oil production at one of its largest oil fields in Somalia as storage tanks filled up. Also, Kairos reported today that four of six tanks at Saudi Arabia’s Ras Tanura refinery are full, and the Juma terminal on the country’s east coast is quickly running out of excess capacity. 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.
Today’s weekly EIA inventory report is barrels for crude oil and products. EIA crude inventories rose to a 9-month high of +3.48 million bbl, a bigger-than-expected build of +3.0 million bbl. Also, EIS gasoline supplies fell -1.7 million bbl, a smaller drop than expectations for -1.98 million bbl. In addition, EIA distillate inventories unexpectedly rose by +429,000 bbl, compared to expectations of -2.36 million bbl. Finally, crude supplies at Cushing, the delivery point for WTI futures, rose to a 1.5-year high of 1.56 million bbl.
Today’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) extractive 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 at the end of February 27 fell -2 to 409 rigs, just above the 4.25 year low of 406 rigs posted in the week ending 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
