July WTI crude oil (CLN25) Monday closed up +0.71 (+1.10%), and July RBOB gasoline (RBN25) closed up +0.0184 (+0.89%).
Crude oil and gasoline prices settled higher Monday, with crude reaching a 2-1/4 month high and gasoline reaching a 1-week high. Monday's weaker dollar was bullish for energy prices. Also, oil prices have support from hopes that US-China trade talks in London will lead to an easing of trade tensions. In addition, crude has carryover support from last Friday when the weekly report from Baker Hughes showed active US oil rigs in the week ending June 6 fell to a 3-1/2 year low, a harbinger of lower near-term US crude production. Crude oil prices were undercut by a weaker-than-expected Chinese trade report that was bearish for global growth prospects and energy demand.
Reduced oil production in Canada is bullish for crude prices, as wildfires in Alberta, Canada, have shut down nearly 350,000 barrels per day (bpd) of crude production, or approximately 7% of Canada's total output.
China's trade report was below expectations and was bearish for global growth prospects as May exports rose +4.8% y/y, weaker than expectations of +6.0% y/y. Also, May imports fell -3.4% y/y, weaker than expectations of -0.8% y/y.
Crude prices were undercut last Wednesday after Bloomberg reported that Saudi Arabia is open to additional crude production hikes in a bid to increase its market share. The report stated that Saudi Arabia wants OPEC+ to increase crude output by 411,000 bpd in August and potentially in September to capitalize on peak summer demand.
Signs of a global oil supply glut are weighing on crude prices, as crude oil inventories have risen by 170 million barrels over the past 100 days, according to Kayrros, which monitors inventories.
An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +9.1% w/w to 81.83 million bbl in the week ended June 6.
Concern about a global oil glut is negative for crude prices. On May 31, OPEC+ agreed to a 411,000 bpd crude production hike for July after raising output by the same amount for June. Saudi Arabia has signaled that additional similar-sized increases in crude output could follow, which is viewed as a strategy to reduce oil prices and punish 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. OPEC+ had previously planned to restore production between January and late 2025, but now that production cut won't be fully restored until September 2026. OPEC May crude production rose +200,000 bpd to 27.54 million bpd.
Doubts about a nuclear deal between Iran and the US supported crude oil prices. Iranian Supreme Leader Ali Khamenei recently said that he doesn't think negotiations with the US will succeed, and he urged the Trump administration to stop "talking nonsense." President Trump recently said Iran will face "something bad" if it doesn't quickly accept a US proposal over its nuclear program.
Last Wednesday's EIA report showed that (1) US crude oil inventories as of May 30 were -7.0% below the seasonal 5-year average, (2) gasoline inventories were -1.6% below the seasonal 5-year average, and (3) distillate inventories were -17.2% below the 5-year seasonal average. US crude oil production in the week ending May 30 rose +0.1% w/w at 13.408 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 June 6 fell by -9 to a 3-1/2 year low of 442 rigs. The number of US oil rigs has fallen over the past two years from the 5-year high of 627 rigs posted in December 2022.
