May WTI crude oil (CLK25) today is down -5.34 (-7.45%), and May RBOB gasoline (RBK25) is down +0.1820 (-7.80%).

Crude oil and gasoline prices today plunged to 3-week lows on concern that President Trump’s harsher-than-expected reciprocal tariffs will ignite a trade war that derails the global economy and energy demand.  Crude also fell as today’s sell-off in the S&P 500 to a 6-1/2 month low undercut confidence in the economic outlook and energy demand.  Losses in crude accelerated today after OPEC+ said it would increase crude production faster than previously announced.  Crude prices plummeted today despite a slide in the dollar index (DXY00) to a 6-month low.  

Today’s US economic news was mostly weaker than expected and was bearish for energy demand and crude prices.  Weekly continuing claims rose +56,000 to a 3-1/3 year high of 1.903 million, above expectations of 1.870 million, showing it has become more difficult for out-of-work people to reenter the workforce.  Also, the Mar ISM services index fell -2.7 to a 9-month low of 50.8, weaker than expectations of 52.9.  Conversely, weekly initial unemployment claims unexpectedly fell -6,000 to a 7-week low of 219,000, showing a stronger labor market than expectations of an increase to 225,000.  

Crude prices were undercut today when OPEC+ said it would boost crude production in May by 411,000 bpd, much more than the +138,000 bpd of crude production it added this month.  OPEC+ is boosting output 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 Mar crude production rose +80,000 bpd to a 13-month high of 27.43 million bpd.

Crude prices have support from Monday when President Trump said he was “very angry” with Russian President Putin for not agreeing to a ceasefire with Ukraine, and he would consider “secondary tariffs” to limit Russian crude exports if Putin continues to refuse to agree to a ceasefire.

A decline in crude oil held worldwide on tankers is bullish for oil prices.  Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -5.5% w/w to 55.67 million bbl in the week ended March 28.

Crude oil found support when the US Treasury Department’s Office of Foreign Assets Control on March 20 sanctioned a China-based oil refinery and 19 entities and vessels tied to shipping Iranian crude oil.  The US is applying pressure to Iranian crude exports after President Trump recently sent a letter to Iran’s Supreme Leader Ali Khamenei that said Iran has a two-month deadline to reach a new nuclear deal.  According to Rystad Energy A/S, a maximum-pressure campaign could remove as much as 1.5 million bpd of Iranian crude exports from global markets, a bullish factor for crude.  

Crude prices are being supported by tensions in the Middle East, which could lead to disruption of crude supplies from the region.  Israel continues to launch airstrikes across Gaza, ending a nearly two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act “with increasing military strength” to free hostages and disarm Hamas.  In addition, the US is launching strikes on Yemen’s Houthi rebels, and Defense Secretary Hegseth said strikes would be “unrelenting” until the group stops attacking vessels in the Red Sea.

Ramped-up Russian oil exports are negative for crude prices after data compiled by Bloomberg from analytics firm Vortexa showed Russian March oil products exports rose to a 5-month high of 3.45 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.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +40,000 bpd w/w to 3.07 million bpd in the week to March 30.  

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.

Wednesday’s EIA report showed that (1) US crude oil inventories as of March 28 were -4.6% below the seasonal 5-year average, (2) gasoline inventories were +2.0% above the seasonal 5-year average, and (3) distillate inventories were -6.0% below the 5-year seasonal average.  US crude oil production in the week ending March 28 was unchanged w/w at 13.58 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 28 fell -2 rigs to 484 rigs, mildly 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.