Crude Prices Finish Sharply Lower on Fears of a Global Oil Glut

Today Markets UAEMay 16, 2025

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June WTI crude oil (CLM25) Thursday closed down -1.53 (-2.42%) and June RBOB gasoline (RBM25) closed down -0.0356 (-1.64%).

Crude oil and gasoline prices fell sharply Thursday after President Trump said the US and Iran are getting closer to a nuclear deal, which could ease sanctions on Iranian crude exports and boost global oil supplies. Also, Thursday’s projection from the International Energy Agency (IEA) that global oil demand growth will slow for the rest of this year is weighing on crude prices. Thursday’s weaker dollar limited the downside for crude prices.

Crude prices tumbled Thursday after President Trump said the US and Iran are “getting closer to a deal” on Iran’s nuclear program. NBC reported Thursday that Ali Shamkhani, an adviser to Iran’s Supreme Leader Ali Khamenei, said Iran is willing to limit its uranium enrichment in exchange for sanctions relief. Bloomberg data estimates if sanctions on Iranian crude are lifted, about 300,000-400,000 bpd of additional crude could hit global markets.

Crude prices were also undercut Thursday by energy demand concerns after the IEA said global oil demand will decelerate to 650,000 bpd over the rest of this year from 990,00 bpd in Q1, citing “economic headwinds.”

Crude found support Tuesday on the outlook for smaller global oil supplies after the US State Department 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.”

Crude prices have support after the US and China this past weekend 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.

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.

An increase in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday 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 rose by +140,000 bpd w/w to 3.48 million bpd in the week to May 11.

Wednesday’s EIA report showed that (1) US crude oil inventories as of May 9 were -6.5% below the seasonal 5-year average, (2) gasoline inventories were -2.8% below the seasonal 5-year average, and (3) distillate inventories were -16.1% below the 5-year seasonal average. US crude oil production in the week ending May 9 rose +0.1% w/w to 13.387 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.