July WTI crude oil (CLN25) Wednesday closed down -0.56 (-0.88%), and July RBOB gasoline (RBN25) closed down -0.0448 (-2.16%).

Crude oil prices fell from a 2-week high Wednesday and turned lower after weaker-than-expected US economic reports raised concern about energy demand.  Losses in crude accelerated today after Bloomberg reported that Saudi Arabia is open to additional crude production hikes in a bid to increase its market share.  Wednesday’s EIA inventory report was mixed as it showed a larger-than-expected draw in crude inventories but showed large increases in gasoline and distillate supplies.

Crude prices were undercut 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.

Crude on Wednesday initially moved higher due to a weaker dollar and after Saudi Arabia cut oil prices to Asian customers less than expected.  Also, Wednesday’s rally in the S&P 500  to a 3-1/4 month high showed confidence in the economic outlook and energy demand.

Wednesday’s US economic news was weaker than expected and was bearish for energy demand and crude prices.  The May ADP employment change rose +37,000, weaker than expectations of +114,000 and the smallest increase in more than two years.  Also, the May ISM services index unexpectedly fell -1.7 to 49.9, weaker than expectations of an increase to 52.0 and the first time the index has fallen below 50 and contracted in 11 months.

Signs of a global oil supply glut are weighing on crude prices after crude oil inventories rose by 170 million barrels in the past 100 days, according to Kayrros, which monitors inventories.

Crude found support Wednesday after Saudi Aramco cut its oil prices to Asian customers for July delivery by -20 cents a barrel, a smaller cut than expectations of -35 cents a barrel.

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, approximately 7% of Canada’s total output.  

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 -28% w/w to 72.07 million bbl in the week ended May 30.

Crude oil has support from last week’s comments from President Trump, who said that Russian President Putin was “playing with fire” for his continued attacks on Ukraine.  CNN reported Tuesday that Mr. Trump could move ahead with new sanctions on Russia in the coming days.  Also, Senator Graham said he has the votes in Congress to pass a sweeping sanctions bill against Russia that would slap a 500% tariff on any country that buys Russian energy products.

Crude oil prices have been undercut by US-Chinese trade tensions that could cause slower global economic activity and reduced demand for crude.  President Trump said today that Chinese President Xi Jinping is “very tough and extremely hard to make a deal with.”  Mr. Trump’s comments dampened optimism for a US-China trade deal in the near future.

Concern about a global oil glut is negative for crude prices.  On Saturday, OPEC+ agreed to a 411,000 bpd crude production hike for July.  On May 3, OPEC+ agreed to raise its crude production level by 411,000 bpd in 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.

Crude has support due to the outlook for smaller global oil supplies after the US State Department recently slapped sanctions on an international network that facilitated the shipment of millions of barrels of Iranian oil to China.  The State Department sanctioned the alleged Iranian front company called Sepehr Energy Jahan Nama Pars for using revenue from the sales of crude to fund the development of weapons, including ballistic missiles and drones, nuclear proliferation, and Iran’s “terrorist proxies.”

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.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -810,000 bpd w/w to 3.24 million bpd in the week to May 25.

Wednesday’s weekly EIA report was mixed for crude and products.  On the bullish side, EIA crude inventories fell -4.3 million bbl, a larger draw than expectations of -3.1 million bbl.  Conversely, EIA gasoline supplies unexpectedly rose +5.2 million bbl versus expectations of a -500,000 bbl draw.  Also, EIA distillate stockpiles rose +4.2 million bbl, a larger build than expectations of +171,000 bbl.  In addition, crude supplies at Cushing, the delivery point for WTI futures, rose +576,000 bbl.

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 May 30 fell by -4 to a 3-1/2 year low of 461 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.