May WTI crude oil (CLK26) on Wednesday closed down -0.05 (-0.05%), and May RBOB gasoline (RBK26) closed up +0.0297 (+0.98%). Crude oil and gasoline prices settled mixed on Wednesday, with crude falling to a 3-week low.
Crude prices came under pressure on Wednesday after the AP reported that the US and Iran had reached an “in principle agreement” to extend the ceasefire to allow more time for diplomacy. The US and Iran are considering extending their ceasefire, which ends on Tuesday, by another two weeks to allow more time to negotiate a peace agreement. Losses in crude were limited on Wednesday after weekly EIA crude inventories unexpectedly declined.
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Persian Gulf oil producers have been forced to cut production by roughly 6% due to the closure of the Strait of Hormuz as local storage facilities reach capacity. On Monday, the US began a blockade of all vessels passing through the Strait of Hormuz that call at Iranian ports or are headed there. The blockade could exacerbate global oil and fuel shortages, as about a fifth of the world’s oil and liquefied natural gas transits through the strait. Iran has been able to export crude during the war, as it exported about 1.7 million bpd in March.
The International Energy Agency (IEA) said Monday that about 13 million bpd of global oil supply has been shuttered by the Iran war and the closure of the Strait of Hormuz. The IEA also said that more than 80 energy facilities have been damaged during the conflict, and a recovery could take as long as two years.
Crude prices also have support after Saudi Arabia’s state producer, Saudi Aramco, raised the price of its main oil grade to Asia last week by $17 a barrel for May delivery, the biggest jump on record.
In a bearish factor for crude, OPEC+ on April 5 said it will boost its crude output by 206,000 bpd in May, although that production hike now seems unlikely given that Middle East producers are being forced to cut production due to the Middle East war. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 827,000 bpd left to restore. OPEC’s March crude production fell by -7.56 million bpd to a 35-year low of 22.05 million bpd.
Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -35% w/w to 89.13 million bbl in the week ended April 10, a 5-month low.
The most recent US-brokered meeting in Geneva to end the war between Russia and Ukraine ended early as Ukrainian President Zelenskiy accused Russia of dragging out the war. Russia has 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.