April WTI crude oil (CLJ26) today is down -11.30 (-11.50%), and April RBOB gasoline (RBJ26) is down -0.3374 (-10.49%). Crude oil and gasoline prices gave up an overnight advance and sold off sharply today, with crude falling to a 1.5-week low and gasoline dropping to a 1-week low. Crude prices plunged today after President Trump postponed strikes on Iran's power plants and said discussions were underway about ending the war in Iran.
Crude prices initially rallied in overnight trade, with crude posting a 2-week high and gasoline soaring to a 3.5-year high after President Trump on Saturday gave Iran until Monday evening to reopen the Strait of Hormuz or the US would attack Iran's power plants. Iran said it would mine the "entire Persian Gulf" and block all access routes through the Strait if its power plants were attacked.
Energy prices remain underpinned after Qatar said last Thursday that there was "extensive damage" at the world's largest natural gas export plant at Ras Laffan Industrial City. Qatar said that Iran's strikes damaged 17% of Ras Laffan's LNG export capacity, a damage that will take three to five years to repair. The International Energy Agency said today that more than 40 energy sites across nine countries in the Middle East have been "severely or very severely" damaged, potentially prolonging disruptions to global supply chains once the war in Iran ends.
The Strait of Hormuz remains essentially closed, and Persian Gulf oil producers have been forced to cut production by roughly 6% as local storage facilities reach capacity. The Strait of Hormuz normally handles a fifth of the world's oil. Goldman Sachs warns that crude prices could exceed the 2008 record high of close to $150 a barrel if flows through the Strait of Hormuz remain depressed through March.
In a bearish factor for crude, OPEC+ on March 1 said it will boost its crude output by 206,000 bpd in April, above estimates of 137,000 bpd, although that production hike now seems unlikely given that Middle East producers are being forced to cut production due to the Middle East war. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has nearly another 1.0 million bpd left to restore. OPEC's February crude production rose by +640,000 bpd to a 3.25-year high of 29.52 million bpd.
Mounting crude supplies in floating storage are a bearish factor for oil prices. According to Vortexa data, about 290 million bbl of Russian and Iranian crude are currently in floating storage on tankers, more than 40% higher than a year ago, due to blockades and sanctions on Russian and Iranian crude. Vortexa reported today that crude oil stored on tankers that have been stationary for at least 7 days fell by -5.5% w/w to 86.55 million bbl in the week ended March 20, the lowest in 4 months.
On February 10, the EIA raised its 2026 US crude production estimate to 13.60 million bpd from 13.59 million bpd last month, and raised its US 2026 energy consumption estimate to 96.00 (quadrillion btu) from 95.37 last month. The IEA last month cut its 2026 global crude surplus estimate to 3.7 million bpd from last month's estimate of 3.815 million bpd.
The most recent US-brokered meeting in Geneva to end the war between Russia and Ukraine ended early as Ukrainian President Zelenskiy accused Russia of dragging out the war. Russia has said the "territorial issue" remains unresolved with Ukraine, and there's "no hope of achieving a long-term settlement" to the war until Russia's demand for territory in Ukraine is accepted. The outlook for the Russia-Ukraine war to continue will keep restrictions on Russian crude in place and is bullish for oil prices.
Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past seven months, limiting Russia's crude oil export capabilities and reducing global oil supplies. Also, since the end of November, Ukraine has ramped up attacks on Russian tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. In addition, new US and EU sanctions on Russian oil companies, infrastructure, and tankers have curbed Russian oil exports.
Wednesday's EIA report showed that (1) US crude oil inventories as of March 13 were -1.4% below the seasonal 5-year average, (2) gasoline inventories were +4.2% above the seasonal 5-year average, and (3) distillate inventories were -2.5% below the 5-year seasonal average. US crude oil production in the week ending March 13 was down -0.1% at 13.668 million bpd, mildly below the record high of 13.862 million bpd posted in the week of November 7.
Baker Hughes reported Friday that the number of active US oil rigs in the week ended March 20 rose by +2 to 414 rigs, modestly 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 from the 5.5-year high of 627 rigs reported 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.
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