Rich Asplund – Barchart – 40 minutes ago
April WTI crude oil (CLJ25) Monday closed down -1.01 (-1.51%), and April RBOB gasoline (RBJ25) closed down -0.0162 (-0.77%).
Crude oil and gasoline prices on Monday posted moderate losses. Monday’s selloff in the S&P 500 to a 5-3/4 month low sparked risk-off sentiment in asset markets, weighing on crude prices. Also, signs of economic weakness in China are negative for energy demand after China’s consumer prices posted their steepest decline in 13 months. In addition, concern that US tariffs will spark a trade war that dampens economic growth and energy demand are undercutting crude prices. Losses in crude oil accelerated Monday after the dollar recovered from early losses and moved higher.
President Trump’s comments on Sunday were negative for the economic outlook and energy demand when he said the US economy faces “a period of transition” from his tariff policies.
Signs of weak demand in China’s economy are bearish for crude prices. China Feb CPI fell -0.7% y./y, weaker than expectations of -0.4% y/y and the largest decline in 13 months. Also, Jan PPI fell -2.2% y/y, weaker than expectations of -2.1% y/y.
Crude prices have support from last Thursday when US Energy Secretary Wright said that he plans to seek up to $20 billion to refill the Strategic Petroleum Reserve, which currently stands at 395 million bbl but can hold a maximum of 700 million bbl.
Crude has carryover support from Thursday when Treasury Secretary Bessent said the US is willing to “shut down” Iran’s oil sector to achieve peace in the Middle East.
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 last Monday 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. However, Russian crude exports have recently risen as weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +580,000 bpd to 3.53 million bpd in the week to March 2.
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 today that crude oil stored on tankers that have been stationary for at least seven days rose by +4.9% w/w to 84.15 million bbl in the week ended March 7.
Last Wednesday’s EIA report showed that (1) US crude oil inventories as of February 28 were -4.3% below the seasonal 5-year average, (2) gasoline inventories were +1.3% above the seasonal 5-year average, and (3) distillate inventories were -5.5% below the 5-year seasonal average. US crude oil production in the week ending February 28 was unchanged w/w at 13.508 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 7 were unchanged at 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.
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.