July WTI crude oil (CLN26) today is up +1.31 (+1.45%), and July RBOB gasoline (RBN26) is up +0.0450 (+1.48%).
Crude oil prices are moving sharply higher today amid a flare-up in hostilities between Iran and Israel that threatens to derail a truce and complicate negotiations to end the war. Â Dollar weakness today ($DXY) is also supportive of crude prices.Â
Crude oil prices rallied today after Israel said it struck several military targets in Iran, retaliating against missile attacks by Iran, and the Tasnim News Agency reported that Iran said it is prepared for a long-term war with Israel and for strikes on American interests. Also, Israel said it was halting its attacks on Iran, but strikes in southern Lebanon will continue in the coming days at full force.
Crude prices fell from their best level today after Iran signaled an end to its current military operations against Israel, and President Trump said the two sides were looking to agree to an immediate ceasefire.
Crude prices also garnered support today on continued Ukrainian drone attacks on Russian oil infrastructure, as an oil storage site feeding Russia's Black Sea port of Novorossiysk is on fire after overnight drone attacks.  Last Monday, Bloomberg reported that Russia banned jet fuel exports after Ukraine's attacks on Russian oil refineries reached a record high in May.  Russia's refinery runs in May fell -13% y/y to 4.58 million bpd, the lowest since October 2009, according to data from Bloomberg. US and EU sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports.
Weakness in Chinese demand is bearish for crude oil prices. China's May crude imports sank to 6.7 million bpd, the lowest level in over 10 years, according to Kpler data intelligence.
The International Energy Agency (IEA) said in a monthly report released in May that global oil inventories declined at about 4 million bpd in March and April, and that the market will remain "severely undersupplied" until October, even if the conflict ends soon. Goldman Sachs estimates that crude output in the Persian Gulf has been curtailed by about 14.5 million bpd, and that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, which could hit a billion bbl by June.
As a bearish factor for crude, OPEC delegates said on May 14 that the cartel aims to continue a series of oil quota increases over the next few months, completing the return of halted oil production by the end of September. The group already formally agreed to restore about two-thirds of the 1.65 million bpd supply cutback it made back in 2023 and said it plans to raise output targets further and to revive the final portion in three more monthly stages. On May 3, OPEC+ said it will boost its crude output by 188,000 bpd in June after raising production by 206,000 bpd in May, although any production hike now seems unlikely given that Middle East producers are being forced to cut production due to the Middle East war.  OPEC's May crude production fell by -3.36 million bpd to a 40-year low of 16.33 million bpd.Â
Vortexa reported today that crude oil stored on tankers that have been stationary for at least 7 days rose +1.2% w/w to 86.59 million bbls in the week ended June 5.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of May 29 were -3.5% below the seasonal 5-year average, (2) gasoline inventories were -4.9% below the seasonal 5-year average, and (3) distillate inventories were -12.4% below the 5-year seasonal average. US crude oil production in the week ending May 29 fell -0.1% w/w to 13.707 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 June 5 rose by +2 to an 11-month high of 431 rigs, well 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.
