OFOR -

May WTI crude oil (CLK25) Monday closed up +2.12 (+3.06%), and May RBOB gasoline (RBK25) closed up +0.0472 (+2.10%).

Crude oil and gasoline prices rallied sharply Monday, with crude posting a 5-week high and gasoline posting a 7-month nearest-futures high.  Crude rose Monday after President Trump threatened to curtail crude exports from Russia, the world's third-largest oil producer.  Bearish factors for crude were a stronger dollar and concern about economic damage from US tariffs.

Crude prices rallied Monday after President Trump said he was "very angry" with Russian President Putin for not agreeing to a ceasefire with Ukraine, and he would consider "secondary tariffs" to limit Russian crude exports if Putin continues to refuse to agree to a ceasefire.

A decline 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 -5.5% w/w to 55.67 million bbl in the week ended March 28.

Crude oil found support when the US Treasury Department's Office of Foreign Assets Control on March 20 sanctioned a China-based oil refinery and 19 entities and vessels tied to shipping Iranian crude oil.  The US is applying pressure to Iranian crude exports after President Trump recently sent a letter to Iran's Supreme Leader Ali Khamenei that said Iran has a two-month deadline to reach a new nuclear deal.  According to Rystad Energy A/S, a maximum-pressure campaign could remove as much as 1.5 million bpd of Iranian crude exports from global markets, a bullish factor for crude.  

Crude prices are being supported by tensions in the Middle East, which could lead to disruption of crude supplies from the region.  Israel continues to launch airstrikes across Gaza, ending a nearly two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act "with increasing military strength" to free hostages and disarm Hamas.  In addition, the US is launching strikes on Yemen's Houthi rebels, and Defense Secretary Hegseth said strikes would be "unrelenting" until the group stops attacking vessels in the Red Sea.

Ramped-up Russian oil exports are negative for crude prices after data compiled by Bloomberg from analytics firm Vortexa showed Russian March oil products exports rose to a 5-month high of 3.45 million bpd.

Crude prices were undercut when OPEC+ said on March 3 that it would restart some halted crude output in April, adding 138,000 bpd to global supplies.  That is the first of a series of monthly hikes to reverse the 2-year-long production cut, which will gradually restore a total of 2.2 million bpd.  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 Feb crude production rose +320,000 bpd to a 14-month high of 27.35 million bpd.

In a supportive factor for crude oil prices, the US on January 10 imposed new sanctions on Russia's oil industry that could curb global oil supplies.  The measures targeted Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude in the first 10 months of 2024, accounting for about 30% of its tanker flow, according to Bloomberg data.  The US also targeted insurers and traders linked to hundreds of tanker cargoes.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -530,000 bpd w/w to 3.03 million bpd in the week to March 23.  

Crude oil demand in China has weakened and is a bearish factor for oil prices.  According to Chinese customs data, China's 2024 crude imports fell -1.9% y/y to 553 MMT.  China is the world's biggest crude importer.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of March 21 were -5.3% below the seasonal 5-year average, (2) gasoline inventories were +2.3% above the seasonal 5-year average, and (3) distillate inventories were -6.8% below the 5-year seasonal average.  US crude oil production in the week ending March 21 was unchanged w/w at 13.574 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 March 28 fell -2 rigs to 484 rigs, mildly above the 3-year low of 472 rigs posted on January 24.  The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.