June WTI crude oil (CLM26) on Friday closed up +0.61 (+0.64%), and June RBOB gasoline (RBM26) closed up +0.0707 (+2.05%).  Crude oil and gasoline prices settled higher on Friday due to concerns about the sustainability of the ceasefire between the US and Iran amid fresh hostilities in the Strait of Hormuz.  The markets await further updates after the US presented a proposal to Iran that would gradually reopen the Strait of Hormuz and lift the US blockade on Iranian ports.   Iran is expected to respond via Pakistan in the next few days.  

Crude prices rose on Friday on fresh hostilities between the US and Iran after Iran's semi-official Tasnim news agency said Iran seized an oil tanker today in the Strait of Hormuz for "attempting to disrupt oil exports and the interests of the Iranian nation."  Also, US forces targeted missile and drone launch sites and other military assets in Iran that were responsible for attacking three US Navy destroyers transiting the Strait of Hormuz.  In addition, the US said it "disabled" two unladen, Iranian-flagged oil tankers that tried to move through the strait.

Crude prices are also climbing amid a report that said the US is looking to restart the operation as soon as next week to guide commercial ships through the Strait of Hormuz with naval and air support.  The Wall Street Journal reported Thursday that Saudi Arabia and Kuwait have lifted restrictions on the US military's use of their bases and airspace when Iran launched missiles and drones at the UAE in response to the US effort to open the strait.  Saudi Arabia and Kuwait had blocked the US military's use of their bases and airspace after senior US officials downplayed Iranian attacks on the Persian Gulf in reaction to opening the strait.

Energy prices remain underpinned as the US-Iran war keeps the Strait of Hormuz closed.  The ongoing conflict is exacerbating global oil and fuel shortages, as about a fifth of the world's oil and liquefied natural gas transits through the strait.  Goldman Sachs estimates that crude output in the Persian Gulf has been curtailed by about 14.5 million bpd, and that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, which could hit a billion bbl by June.  Persian Gulf oil producers have been forced to cut production by roughly 6% due to the closure of the Strait of Hormuz as local storage facilities reach capacity.  On Thursday, the International Energy Agency (IEA) said that about 14 million bpd of global oil supply has been shuttered by the Iran war and the closure of the Strait of Hormuz.  The IEA also said that more than 80 energy facilities have been damaged during the conflict, and a recovery could take as long as two years.

Last Tuesday, the United Arab Emirates (UAE) said it will leave OPEC on May 1.  The UAE's decision to leave OPEC, the third-largest producer in the cartel, is bearish for crude prices, as it allows the UAE to boost production without being constrained by OPEC's output quotas.

In a bearish factor for crude, OPEC+ on Sunday said it will boost its crude output by 188,000 bpd in June after raising production by 206,000 bpd in May, although any production hike now seems unlikely given that Middle East producers are being forced to cut production due to the Middle East war.  OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 827,000 bpd left to restore.  OPEC's April crude production fell by -420,000 bpd to a 35-year low of 20.55 million bpd.

Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose +1.4% w/w to 149.56 million bbl in the week ended May 1, the highest in 4 months.

The most recent US-brokered meeting in Geneva to end the war between Russia and Ukraine ended early as Ukrainian President Zelenskiy accused Russia of dragging out the war.  Russia has 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.

Ukrainian drone and missile attacks have targeted at least 30 Russian refineries over the past ten months, limiting Russia's crude oil export capabilities and reducing global oil supplies.  There were at least 21 Ukrainian strikes on Russia's refineries, export terminals, and oil pipeline infrastructure in April, knocking Russia's average refinery runs to 4.69 million bpd, the lowest in 16 years, according to Bloomberg data.  Also, 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 May 1 were +0.7% above the seasonal 5-year average, (2) gasoline inventories were -3.1% below the seasonal 5-year average, and (3) distillate inventories were -10.1% below the 5-year seasonal average.  US crude oil production in the week ending May 1 fell -0.1% w/w at 13.573 million bpd, mildly below the record high of 13.862 million bpd posted in the week of November 7.

Baker Hughes reported Friday that the number of active US oil rigs in the week ended May 8 rose by +2 to 410 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.
 

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