May WTI Crude Oil (CLK26) is down -1.62 (-1.60%), and May RBOB Gasoline (RBK26) is down -0.0787 (-2.46%) today. Crude oil and gasoline prices are sharply lower today amid growing optimism that the war in the Middle East is coming to an end. Crude oil prices remained low after EIA weekly crude oil inventories rose more than expected to a 2.75-year high.
Crude oil is falling today after President Trump said he expected the United States would end the war with Iran in two to three weeks. Trump said Iran has called for a ceasefire, which it will consider when the Strait of Hormuz is “open, free and clear.”
On Tuesday, President Trump said he is considering ending the war in Iran even if the Strait of Hormuz remains closed. Trump believes the United States should achieve its main goals of hampering the Iranian navy and its missile stockpiles and reducing hostilities, while diplomatically pressuring Iran to reopen the Strait. If that fails, the United States would pressure its allies in Europe and the Gulf to take the lead in reopening the waterway. Iranian President Masoud Pezeskhian said his country had the “necessary will to end this war,” provided hostilities on all fronts cease and Iran’s sovereignty over the Strait of Hormuz is recognized.
The Strait of Hormuz remains essentially closed, limiting global oil supply and boosting crude prices. Persian Gulf oil producers have been forced to cut production by about 6% as local storage facilities reach capacity. A fifth of the world’s oil normally passes through the Strait of Hormuz. The Wall Street Journal reported today that the United Arab Emirates is preparing to help the United States and other allies open the Strait of Hormuz by force and is pushing for the passage of a United Nations Security Council resolution authorizing such action.
Concerns that Iran’s war could spread to the entire Middle East are also bullish for crude oil prices. Saudi Arabia agreed to give U.S. military access to King Fahd Air Base, and the United Arab Emirates said Iranian citizens are not allowed to enter or transit through the country. Iran’s neighbors in the Middle East are increasingly frustrated with Iran, which has responded to American and Israeli attacks by striking targets in several nearby nations.
Energy prices remain supported after the International Energy Agency said last Monday that more than 40 energy sites in nine Middle East countries have been “severely or very severely” damaged, which could prolong disruptions to global supply chains once the war in Iran ends.
In a bearish factor for crude, OPEC+ said on March 1 that it will increase its crude output by 206,000 bpd in April, above estimates of 137,000 bpd, although that production increase now appears unlikely given that Middle East producers are being forced to cut output due to the Middle East war. OPEC+ is trying to restore the entire 2.2 million bpd production cut it made in early 2024, but still has almost another 1.0 million bpd left to restore. OPEC crude oil production in February increased by +640,000 bpd to a 3.25-year high of 29.52 million bpd.
The increase in the supply of crude oil in floating storage is a bearish factor for oil prices. According to data from Vortexa, around 290 million barrels of Russian and Iranian crude oil are currently stored floating on tankers, more than 40% more than a year ago, due to blockades and sanctions on Russian and Iranian crude oil. Vortexa reported on Monday that crude oil stored on tankers that have been parked for at least 7 days increased +47% p/p to 136.13 million bbl in the week ending March 27.
On February 10, the EIA raised its 2026 US crude oil production estimate to 13.60 million bpd from 13.59 million bpd last month, and raised its 2026 US energy consumption estimate to 96.00 (quadrillion bpd) from 95.37 last month. Last month, the IEA cut its global crude surplus estimate for 2026 to 3.7 million bpd from last month’s estimate of 3.815 million bpd.
The most recent meeting in Geneva, brokered by the United States, to end the war between Russia and Ukraine ended early when Ukrainian President Zelenskiy accused Russia of prolonging the war. Russia has said that the “territorial question” remains unresolved with Ukraine and that there is “no hope of achieving a long-term solution” to the war until Russia’s demand for territory in Ukraine is accepted. The prospect of a continued war between Russia and Ukraine will keep restrictions on Russian crude oil in place and is bullish for oil prices.
Ukrainian drone and missile attacks have targeted at least 28 Russian refineries in the past seven months, limiting Russia’s crude oil export capabilities and reducing global oil supplies. Additionally, since late November, Ukraine has stepped up attacks on Russian oil tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. Additionally, new US and EU sanctions on Russian oil companies, infrastructure and tankers have curbed Russian oil exports.
Today’s EIA weekly report was mixed for crude oil and its products. On the bearish side, EIA crude oil inventories increased by +5.45 million bbl to a 2.75-year high, above expectations of +2.0 million bbl. Additionally, EIA gasoline supplies fell by -586,000 bbl, a smaller drop than expectations of -2.37 million bbl. Additionally, crude oil reserves at Cushing, the delivery point for WTI futures, rose -520,000 bbl to hit a 20-month high. On the positive side, EIA distillate inventories fell -2.1 million bbl, a larger drop than expectations of -53,000 bbl.
Today’s EIA report showed that (1) US crude oil inventories as of March 27 were +1.4% above the 5-year seasonal average, (2) gasoline inventories were +4.2% above the 5-year seasonal average, and (3) distillate inventories were -2.2% below the 5-year seasonal average. US crude oil production in the week ending March 27 was unchanged at 13.657 million bpd, slightly below the record 13.862 million bpd recorded in the week of November 7.
Baker Hughes reported last Friday that the number of active U.S. oil rigs in the week ending March 27 fell -5 to 409 rigs, just above the 4.25-year low of 406 rigs recorded in the week ending December 19.
On the date of publication, Rich Asplund had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
