Crude Oil Prices Surge Amid Trade Optimism and Global Dynamics
On Thursday, May WTI crude oil futures experienced a significant gain, closing up by 3.54%, while RBOB gasoline prices also rose by 2.71%. This rise highlights a growing sentiment in the market, as crude oil and gasoline prices reached levels not seen in the past one and a half weeks. A sense of optimism surrounding potential trade agreements has alleviated some concerns regarding tariffs, which in turn has positively influenced crude prices. President Trump’s remarks indicating substantial progress in talks with Japanese officials and confidence in reaching a deal with the European Union have contributed to this bullish trend.
Market players are also grappling with the reality that U.S. sanctions concerning Iranian crude oil are unlikely to be lifted soon. This uncertainty has led to higher oil prices as initial optimism from recent U.S.-Iran discussions over a new nuclear deal begins to fade. Rising crude oil prices are partly attributed to ongoing nuclear talks that seem to be stagnating, leading to expectations of continued restrictions on Iranian crude exports. U.S. Treasury Secretary Bessent emphasized readiness to implement all measures necessary to minimize Iran’s energy exports significantly.
In addition to geopolitical influences, stronger crude demand from China, the globe’s largest crude importer, supports the upward trend in oil prices. Recent reports indicate that Chinese crude imports soared to 12.1 million barrels per day (bpd) in March, marking the highest import figures since August 2023.
However, projections from Goldman Sachs indicate that global crude demand could face challenges due to the ongoing trade conflict and increasing oil production from OPEC+. This situation has spurred expectations of substantial surpluses in the oil market, with estimates suggesting a surplus of 800,000 bpd in 2025 and an increase to 1.4 million bpd by 2026.
Despite the recent price surge, crude oil has been under pressure in the preceding week, hitting a four-year low earlier. Concerns over weaker global economic growth and its impact on energy demand continue to haunt the market. Although President Trump temporarily paused reciprocal tariffs, other tariffs implemented previously remain in effect.
A recent decision by OPEC+ to increase crude production in May by 411,000 bpd has left a negative sentiment in the market, particularly as this figure surpasses the previously anticipated increase of 138,000 bpd for the month. OPEC+ aims to restore production levels that have been curtailed over the past two years gradually. What was initially planned as a full restoration by late 2025 has now been extended to September 2026, raising concerns about supply dynamics. In March, OPEC production reached a 13-month high of 27.43 million bpd, up by 80,000 bpd.
Additionally, an uptick in crude oil being stored on tankers, which is perceived as bearish for prices, has emerged. Data from Vortexa shows a slight increase of 0.4% in the volume of crude oil stored on stationary tankers, currently at 65.72 million barrels as of mid-April.
Tensions in the Middle East, exacerbated by conflict between Israel and Hamas, also lend support to crude oil prices, as fears of supply disruptions from the region loom. Israeli airstrikes and military operations have renewed volatility, and the U.S. has made its presence felt through strikes on Houthi rebels in Yemen, promising an unyielding approach until security is restored in international shipping lanes.
Moreover, the U.S. has enforced new sanctions on the Russian oil sector to limit global oil supply. These measures target key Russian oil companies and have implications for tankers involved in the transportation of crude oil. Despite a rise in Russian oil product exports, recent data indicates a decline in crude exports from Russia as of mid-April.
The latest report from the Energy Information Administration (EIA) provides insight into U.S. oil inventory levels. As of April 11, U.S. crude oil inventories were reported to be 5.2% below the five-year seasonal average, while gasoline and distillate inventories were also lower than their seasonal averages.
In terms of production, U.S. crude oil output remains steady, recorded at approximately 13.462 million bpd, just shy of its peak levels. Meanwhile, the Baker Hughes report reveals that active oil rigs in the U.S. have seen a slight uptick to 481, although this remains well below previous highs.
As developments unfold in the global oil landscape, the interplay of trade discussions, geopolitical tensions, and OPEC+ strategies will continue to shape price movements in crude oil and gasoline markets.
