March WTI crude oil (CLH26) on Wednesday closed up +0.82 (+1.31%), and March RBOB gasoline (RBH26) closed up +0.0215 (+1.14%).
Crude oil and gasoline prices settled sharply higher on Wednesday, with crude oil climbing to a 4-month high and gasoline climbing to a 2-month high. Â Crude prices jumped on Wednesday after President Trump threatened another attack on Iran unless it negotiates a nuclear deal. Â Crude prices also found support from Wednesday's weekly EIA report, which showed that crude inventories unexpectedly declined and gasoline supplies rose less than expected. Â The strength of the dollar on Wednesday limited crude's upside. Â
Crude oil prices jumped on Wednesday after President Trump said in a social media post that he wants Iran to come to the table and negotiate a "fair and equitable deal with No Nuclear Weapons." He warned Iran that time is running out to make a deal with the US, noting that a fleet of US warships entering the region is ready to complete their mission "with speed and violence." A US attack on Iran could disrupt oil supplies from OPEC's fourth-largest producer. Â
Crude oil also has support after Russia threw cold water on hopes of a breakthrough in peace talks with Ukraine, after the Kremlin 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. Â The outlook for the Russia-Ukraine war to continue will keep restrictions on Russian crude in place and is bullish for oil prices.
The IEA last Wednesday cut its 2026 global crude surplus estimate to 3.7 million bpd from last month's estimate of 3.815 million bpd. Â On January 13, the EIA raised its 2026 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month, and cut its US 2026 energy consumption estimate to 95.37 (quadrillion btu) from 95.68 last month.
Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -0.6% w/w to 113.30 million bbl in the week ended January 23.
Crude garnered support after OPEC+ on January 3 said it would stick to its plan to pause production increases in Q1 of 2026. Â OPEC+ at its November 2025 meeting announced that members would raise production by +137,000 bpd in December, but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. Â OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. Â OPEC+ will meet this weekend to review a decision on output policy and is expected to stick with plans to keep oil production steady. Â OPEC's December crude production rose by +40,000 bpd to 29.03 million bpd.
Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past five months, limiting Russia's crude oil export capabilities and reducing global oil supplies. Â 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. Â 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 mixed for crude oil and products. Â On the bullish side, EIA crude inventories unexpectedly declined by -2.3 million bbl versus expectations of a +1.95 million bbl build. Â Also, EIA gasoline supplies rose by +223,000 bbl, a smaller build than expectations of +2.55 million bbl. Â In addition, crude stockpiles at Cushing, the delivery point of WTI futures, fell by -278,000 bbl. Â On the bearish side, EIA distillate inventories unexpectedly rose by +329,000 bbl to a 2-year high versus expectations of a -250,000 bbl draw. Â
Wednesday's EIA report showed that (1) US crude oil inventories as of January 23 were -2.9% below the seasonal 5-year average, (2) gasoline inventories were +4.1% above the seasonal 5-year average, and (3) distillate inventories were +1.0% above the 5-year seasonal average. Â US crude oil production in the week ending January 23 was down -0.3% w/w to 13.696 million bpd, modestly below the record high of 13.862 million bpd from the week of November 7.
Baker Hughes reported last Friday that the number of active US oil rigs in the week ended January 23 rose by +1 to 411 rigs, just above the 4.25-year low of 406 rigs posted in the week ended December 19. Â 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.
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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.
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