March WTI crude oil (CLH26) on Friday closed up +0.26 (+0.41%), and March RBOB gasoline (RBH26) closed up +0.0266 (+1.38%).
Crude oil and gasoline prices recovered from early losses on Friday and moved higher after the dollar (DXY00) weakened. Also, doubts that the US-Iranian talks in Oman will lead to a breakthrough in a nuclear deal are underpinning oil prices after the Wall Street Journal reported that Iran stands by its refusal to end uranium enrichment, a major sticking point for the US. Crude prices also found support on Friday after the University of Michigan US Feb consumer sentiment index unexpectedly rose to a 6-month high, a positive factor for energy demand and crude prices.
The escalation of geopolitical risk in the Middle East has added a risk premium to crude prices. If negotiations between Iran and the US fail to come to an agreement on Iran ending its enrichment of nuclear fuel, the US could proceed with military strikes against Iran, which could disrupt key shipping lanes as well as Iran’s 3.3 million bpd of crude production.
Last Thursday, crude oil rallied to a 6-month high after President Trump said that US ships he ordered to the Middle East were ready to fulfill their mission “with speed and violence, if necessary” if Iran fails to agree to a nuclear deal. An attack on Iran, OPEC’s fourth-largest producer, could disrupt the country’s crude supplies and potentially close the Strait of Hormuz, through which about 20% of the world’s oil passes.
Crude has support after President Trump said he would roll back tariffs on India in exchange for India agreeing to stop buying Russian oil. Deliveries of Russian crude into Indian ports fell to about 1.2 million bpd in December, the lowest in more than three years.
An increase in crude exports from Venezuela is also boosting global oil supplies and is bearish for prices. Reuters reported on Monday that Venezuelan crude exports rose to 800,000 bpd in January from 498,000 bpd in December.
Crude oil also has support after Russia recently threw cold water on hopes of a breakthrough in peace talks with Ukraine, after the Kremlin 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. The outlook for the Russia-Ukraine war to continue will keep restrictions on Russian crude in place and is bullish for oil prices.
The IEA last month cut its 2026 global crude surplus estimate to 3.7 million bpd from last month’s estimate of 3.815 million bpd. On January 13, the EIA raised its 2026 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month, and cut its US 2026 energy consumption estimate to 95.37 (quadrillion btu) from 95.68 last month.
Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -6.2% w/w to 103.00 million bbl in the week ended January 30.
On Sunday, OPEC+ said it would stick to its plan to pause production increases through Q1 of 2026. OPEC+ at its November 2025 meeting announced that members would raise production by +137,000 bpd in December, but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC’s December crude production rose by +40,000 bpd to 29.03 million bpd.
Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past six months, limiting Russia’s crude oil export capabilities and reducing global oil supplies. Also, since the end of November, Ukraine has ramped up attacks on Russian tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. In addition, new US and EU sanctions on Russian oil companies, infrastructure, and tankers have curbed Russian oil exports.
Wednesday’s EIA report showed that (1) US crude oil inventories as of January 30 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were +3.8% above the seasonal 5-year average, and (3) distillate inventories were -2.2% below the 5-year seasonal average. US crude oil production in the week ending January 30 was down -3.5% w/w to a 14-month low of 13.215 million bpd, moderately below the record high of 13.862 million bpd from the week of November 7.
Baker Hughes reported Friday that the number of active US oil rigs in the week ended February 6 rose by +1 to 412 rigs, just above the 4.25-year low of 406 rigs posted in the week ended December 19. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
