April WTI crude oil (CLJ26) on Thursday closed up +8.48 (+9.72%), and April RBOB gasoline (RBJ26) closed up +0.1763 (+6.32%). Energy prices settled sharply higher on Thursday due to comments from Iran's Supreme Leader Ayatollah Mojtaba Khamenei, who said that Iran's leverage of closing the Strait of Hormuz should be used and attacks on Gulf Arab neighbors will continue. He added that Iran will open unspecified "other fronts" in the war if the US and Israel persist with their attacks.
Gains in crude oil accelerated on Thursday after UK Defense Secretary Healey said it is increasingly evident that Iran is laying mines in the Strait of Hormuz. Also, comments from President Trump gave crude prices a boost when he said that preventing Iran from having nuclear weapons is "of far greater interest and importance" to him than the cost of oil, a sign that the war in the Middle East isn't close to a de-escalation.
Crude oil prices spiked higher to a 3.75-year high of $119.48 on Monday after Israel, on Saturday, bombed 30 Iranian oil depots. Crude prices have since fallen back and are trading between $90 and $100 a barrel.
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. Iraq on Thursday suspended oil terminal activity following an attack by Iran on two tankers, and Oman temporarily evacuated a key oil export hub at Mina Al Fahal. President Trump has said the US military has a plan to escort ships through the Strait of Hormuz, but US Energy Secretary Wright said on Thursday that military escorts through the strait were unlikely to start until the end of the month. The Strait of Hormuz normally handles a fifth of the world's oil.
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 January crude production fell by -230,000 bpd to a 5-month low of 28.83 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 50% higher than a year ago, due to blockades and sanctions on Russian and Iranian crude. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell by -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 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 weekly EIA report was bearish for crude oil as crude stockpiles rose by +3.824 million bbls, a larger rise than expectations for a rise of +2.5 million bbls. Wednesday's EIA report showed that (1) US crude oil inventories as of March 6 were -2.7% below the seasonal 5-year average, (2) gasoline inventories were +5.4% above the seasonal 5-year average, and (3) distillate inventories were -1.6% below the 5-year seasonal average. US crude oil production in the week ending March 6 was down -0.1% at 13.678 million bpd, mildly below the record high of 13.862 million bpd posted in the week of November 7.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ended March 6 rose by +4 to 411 rigs, 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 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.
More news from Barchart
