August WTI crude oil (CLQ25) on Monday closed down -1.47 (-2.15%), and August RBOB gasoline (RBQ25) closed down -0.0216 (-0.99%).
Crude oil and gasoline prices today fell from 3-week highs and fell sharply on speculation that President Trump's tariff policies will slow global economic growth and energy demand. Also, Monday's rally in the dollar index (DXY00) to a 2.5-week high is bearish for energy prices. Losses in crude accelerated Monday after President Trump said the Senate sanctions bill that would levy 500% tariffs on China and India if they make any purchases of Russian energy was "not necessary." Instead, Mr. Trump announced a 50-day wait period to see if Russia would agree to a ceasefire in Ukraine, which signals Russian crude exports will continue to flow.
Crude prices on Monday initially climbed to a 3-week high on concern that President Trump later today might announce new sanctions on Russian energy exports, which could curb global oil supplies.
Crude prices were under pressure Monday after President Trump over the weekend said the US will impose 30% tariffs on US imports from the European Union and Mexico, beginning August 1. The additional tariffs have heightened trade tensions that risk slowing global economic growth and energy demand.
Monday's trade news from China was better than expected, a positive factor for global energy demand and crude prices. China June exports rose +5.8% y/y, stronger than expectations of +5.0% y/y. Also, June imports rose +1.1% y/y, stronger than expectations of +0.3% y/y.
Bloomberg reported last Thursday that OPEC+ is discussing a pause in further production increases from October, following its next monthly hike in September of 548,000 barrels. OPEC+ may be concerned about a slowdown in global oil demand in the second half of this year that could lead to a supply glut if the group keeps boosting production. The International Energy Agency said inventories have been accumulating at a rate of 1 million bpd and that global crude oil market faces a surplus by Q4-2025 equivalent to 1.5% of global crude consumption.
Concern about a global oil glut is negative for crude prices. On July 5, OPEC+ agreed to raise its crude production by 548,000 barrels per day (bpd) beginning August 1, exceeding expectations of a 411,000 bpd increase. Saudi Arabia also stated that additional similar-sized increases in crude output could follow, which is viewed as a strategy to reduce oil prices and penalize overproducing OPEC+ members, such as Kazakhstan and Iraq. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026. On May 31, OPEC+ agreed to a 411,000 bpd increase in crude production for July, following the same 411,000 bpd hike for June. June crude production rose +360,000 bpd to a 1.5-year high of 28.10 million bpd.
Heightened tensions in the Middle East are supportive of crude prices after Yemen's Houthi rebels attacked another merchant ship in the Red Sea last Tuesday, the second such attack following a recent attack on a vessel sailing through the Red Sea. The attacks on shipping could boost freight rates and insurance costs for shippers, making crude supplies from the Middle East more expensive. The attacks have already prompted retaliatory strikes by Israeli jets on Houthi targets and could prompt strikes from the US as well.
A decrease 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 -4.6% w/w to 78.03 million bbl in the week ended July 11.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of July 4 were -8.0% below the seasonal 5-year average, (2) gasoline inventories were -1.2% below the seasonal 5-year average, and (3) distillate inventories were -23.6% below the 5-year seasonal average. US crude oil production in the week ending July 4 fell -0.4% w/w to 13.385 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 July 11 fell by -1 rig to a new 3.75-year low of 424 rigs. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.25-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.
