On Wednesday, June WTI crude oil prices ended lower, dropping by $1.40 to settle at -2.20%. Similarly, June RBOB gasoline saw a decrease of $0.0165, down by 0.79%. The decline in crude oil and gasoline prices came after reaching a two-and-a-half-week peak, and much of the downturn can be attributed to a stronger dollar, which typically exerts downward pressure on energy costs.
Contributing to the lower prices was a statement from Kazakhstan’s energy minister indicating that the country will not cut crude production levels and will prioritize its national interests over OPEC+ agreements. This announcement has raised concerns that Saudi Arabia could respond by increasing its own production, possibly leading to an oversupply in the global oil market, which would further drive down prices.
Additionally, reports emerged indicating that multiple OPEC+ nations are likely to propose accelerating output increases for the month of June during their upcoming meeting on May 5. This has added to the bearish sentiment surrounding crude oil prices, which initially spiked due to positive indicators about a potential easing of US-China trade tensions, an outcome that could bolster economic growth and energy demand.
Concerns about a U.S.-Iran nuclear deal are also impacting market dynamics. Should negotiations succeed, they could pave the way for the lifting of export restrictions on Iranian crude, which may inject excess oil into the market. Following negotiations over the past weekend, Iran’s foreign minister mentioned a “better understanding” with the U.S., and talks are expected to continue in Oman.
Reports from Vortexa highlighted a 19% increase in crude oil stored on tankers that have been stationary for over a week, which points to a potential oversupply situation. Recent market conditions have not been favorable for crude, with prices plummeting to a four-year low earlier this month. Trade turmoil and apprehensions regarding global economic growth have further compounded these issues.
Optimism in the market has been partly driven by rising crude demand in China, the world’s largest oil importer. Reports indicated that China’s crude imports in March reached 12.1 million barrels per day (bpd), marking a peak not seen since August 2023.
Further influencing the market, OPEC+ announced a plan to increase crude production for May by 411,000 bpd, exceeding their prior goal of an increase of 138,000 bpd. This adjustment aims to gradually restore the production cuts that have been in effect for about two years. Initially, OPEC+ had intended to restore production between January and late 2025, but current projections suggest that full restoration might not occur until September 2026.
Geopolitical tensions are also contributing to price fluctuations. For instance, Israel has resumed airstrikes in Gaza, impacting regional stability and raising concerns about the potential disruption of crude supplies. The U.S. has also engaged militarily against Houthi rebels in Yemen, pledging persistent actions until the group ceases hostile activities.
In a contributing factor to rising oil prices, the U.S. imposed new sanctions on Russia’s oil sector, targeting companies that play significant roles in oil exports. This development led to speculation about a potential decrease in global oil supplies.
Additionally, the Energy Information Administration (EIA) recently reported a smaller-than-expected rise in U.S. crude oil inventories, which increased by 244,000 barrels but was far below the anticipated increase of 1.55 million barrels. Meanwhile, gasoline stocks dipped significantly, reflecting a surge in U.S. gasoline demand, which climbed to 9.4 million bpd—a six-month high.
As the current week closed, the EIA report revealed several critical data points, including that U.S. crude stocks were 5.3% below the five-year seasonal average and that distillate inventories experienced a more pronounced decrease. Notably, U.S. crude oil production remained stable at around 13.46 million bpd.
Recent data from Baker Hughes shows a slight uptick in the number of active oil rigs in the United States, raising the count to 481 rigs—an indication of potential recovery in domestic oil production. This figure remains moderate compared to previous peaks, indicating that the U.S. oil industry is still adjusting to a fluctuating market environment.
As market dynamics continue to evolve, industry stakeholders are closely monitoring the interplay of production decisions, geopolitical developments, and overall demand trends.
