June WTI crude oil (CLM25) today is up +1.28 (+2.10%), and June RBOB gasoline (RBM25) is up +0.0288 (+1.37%).

Crude oil and gasoline prices today are sharply higher, with crude climbing to a 2-week high and gasoline climbing to a 6-week high.  Crude prices are rallying today after the US and China agreed to reduce tariffs against each other, which eased trade tensions and improved the global economic outlook and energy demand prospects.  Also, today's rally in the S&P 500 to a 2-1/4 month high shows confidence in the economic outlook that is bullish for energy demand and crude prices.  Gains in crude are limited due to today's rally in the dollar index (DXY00) to a 1-month high.

Crude prices rallied today after the US and China agreed to temporarily lower tariffs on each other's products for three months, with the US reducing its tariffs on China from 145% to 30% and China reducing its duties from 125% to 10%.  

The prospects for improved US gasoline demand are supportive of crude prices.  According to the American Automobile Association, it projects that 39.4 million Americans will travel by car this Memorial Day weekend, up +3.1% from last year because US gasoline costs are 50 cents a gallon cheaper than last year.

Easing geopolitical risks in the Middle East are negative for crude prices.  President Trump said that the US would stop its bombing campaign against Houthi rebels in Yemen after Oman facilitated a ceasefire.  Also, Vice President Vance said last Wednesday that a nuclear deal with Iran could reintegrate the country into the global economy.      

Crude prices fell to a 5-week low last Monday due to concern about a global oil glut after OPEC+ on May 3 agreed to raise its crude production level by 411,000 bpd in June.  In a move that could further pressure crude prices, Saudi Arabia 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 Apr crude production fell -200,000 bpd to 27.24 million bpd.

The US and Iran reported progress in recent talks on a deal over Iran's nuclear program, with negotiators from both sides agreeing to meet again in Europe this week.  Any agreement on Iran's nuclear program could prompt the US to remove export restrictions on Iranian crude oil, which would boost oil supplies on the global market and be bearish for crude prices.  

An increase in crude oil held worldwide on tankers is bearish for oil prices.  Vortexa reported today that crude oil stored on tankers that have been stationary for at least seven days rose by +11% w/w to 93.32 million bbl in the week ended May 2.

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.  Russian oil product exports in March rose to a 5-month high of 3.45 million bpd, according to data compiled by Bloomberg from analytics firm Vortexa.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -190,000 bpd w/w to 3.20 million bpd in the week to May 4.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of May 2 were -7.3% below the seasonal 5-year average, (2) gasoline inventories were -3.1% below the seasonal 5-year average, and (3) distillate inventories were -13.1% below the 5-year seasonal average.  US crude oil production in the week ending May 2 fell -0.7% w/w to 13.367 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 9 fell -5 to 474 rigs, just above the 3-1/4 year low of 472 rigs posted on January 24.  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.