April WTI crude oil (CLJ26) on Thursday closed up +6.35 (+8.51%), and April RBOB gasoline (RBJ26) closed up +0.1560 (+6.20%).
Crude oil and gasoline prices soared on Thursday, with crude posting a 19.5-month nearest-futures high and gasoline posting a 1.75-year high. Crude prices continue to climb as the war in the Middle East entered its sixth day on Thursday with no sign of resolution. The Strait of Hormuz remains closed, halting most energy shipments from the Persian Gulf. Also, China on Thursday told its largest refiner to suspend exports of diesel and gasoline due to the escalating conflict in the Persian Gulf, which will tighten global fuel supplies and push fuel prices even higher.
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The closure of the Strait of Hormuz has halted most energy shipments from the Persian Gulf and is bullish for energy prices. Iran’s Islamic Revolutionary Guard Corps has warned ships not to sail through the passageway, saying that vessels “could be at risk from missiles or rogue drones.” The closure of the Strait of Hormuz, which handles a fifth of the world’s oil, has forced Gulf producers unable to export their oil to stockpile the crude in storage tanks. Iraq and Saudi Arabia, OPEC’s largest producers, have curbed crude production as the halt to their exports is filling up their oil storage facilities. Kayrros reported on Wednesday that four of six tanks at Saudi Arabia’s Ras Tanura refinery were full, and the Ju’aymah terminal on the country’s east coast is quickly running out of spare capacity. Goldman Sachs estimates the real-time risk premium for crude oil at $18/bbl, corresponding to its estimate of the impact of a six-week full halt to tanker traffic in the Strait of Hormuz.
Also, damage from an intercepted Iranian drone caused a major fire on Tuesday at the United Arab Emirates’ major oil-trading hub, Fujairah, one of the largest oil storage centers in the Middle East. In addition, Iranian drone attacks forced Saudi Arabia to shut down its Ras Taura refinery, the country’s largest, which refines 550,000 bpd of crude oil.
In a bearish factor for crude, OPEC+ on Sunday said it will boost its crude output by 206,000 bpd in April, above estimates of 137,000 bpd. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has nearly another 1.0 million bpd left to restore. OPEC’s January crude production fell by -230,000 bpd to a 5-month low of 28.83 million bpd.
Mounting crude supplies in floating storage are a bearish factor for oil prices. According to Vortexa data, about 290 million bbl of Russian and Iranian crude are currently in floating storage on tankers, more than 50% higher than a year ago, due to blockades and sanctions on Russian and Iranian crude. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose by +20% w/w to 105.48 million bbl in the week ended February 27.