March WTI crude oil (CLH26) on Wednesday closed up +0.67 (+1.05%), and March RBOB gasoline (RBH26) closed up +0.0197 (+1.01%).

Crude oil and gasoline prices settled higher on Wednesday, with crude posting a 1.5-week high and gasoline posting a 2.75-month high.  Escalating US-Iran tensions are underpinning crude prices after the Wall Street Journal on Wednesday said the US is considering seizing tankers with Iranian crude, and Axios reported that the US could send a second aircraft carrier strike group to the Middle East should nuclear talks with Iran fail.   Crude prices fell from their best levels on Wednesday after weekly EIA crude and gasoline inventories rose more than expected.  

Escalation of geopolitical risk in the Middle East has added a risk premium to crude oil, supporting prices.  The Wall Street Journal said Wednesday that the US has discussed seizing tankers carrying Iranian oil.  Also, Axios reported that the US is considering sending a second aircraft carrier strike group to the Middle East to prepare for military action should nuclear talks with Iran fail.  The US Department of Transportation on Monday issued a maritime advisory stating that American-flagged ships should stay as far as possible from Iranian waters when navigating the Strait of Hormuz.  Iran is OPEC's fourth-largest producer, and a US attack on the country could disrupt its 3.3 million bpd of crude production and potentially close the Strait of Hormuz, through which about 20% of the world's oil passes.  

Wednesday's monthly US jobs report was stronger than expected and is supportive of energy demand and crude prices.  Jan nonfarm payrolls rose +130,000, stronger than expectations of +65,000 and the most in 13 months.  Also, the Jan unemployment rate unexpectedly fell -0.1 to 4.3%, showing a stronger labor market than expectations of no change at 4.4%.

An increase in crude exports from Venezuela is also boosting global oil supplies and is bearish for prices.  Reuters reported last 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.

On Tuesday, the EIA raised its 2026 US crude production estimate to 13.60 million bpd from 13.59 million bpd last month, and raised its US 2026 energy consumption estimate to 96.00 (quadrillion btu) from 95.37 last month.  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.  

Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell by -2.8% w/w to 101.55 million bbl in the week ended February 6.

On February 1, 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 January crude production fell by -230,000 bpd to a 5-month low of 28.83 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 weekly EIA report was mixed for crude oil and products.  On the bullish side, EIA distillate stockpiles fell -2.7 million bbl, a larger draw than expectations of -1.7 million bbl.  On the negative side, EIA crude inventories unexpectedly rose +8.53 million bl to an 8-month high versus expectations of a -24,000 bbl draw.  Also, gasoline supplies rose by +1.16 million bbl to a 5.5-year high, a larger build than expectations of +840,000 bbl.  In addition, crude inventories at Cushing, the delivery point of WTI futures, rose by +1.07 million bbl to a 9-month high.

Wednesday's EIA report showed that (1) US crude oil inventories as of February 6 were -3.4% below the seasonal 5-year average, (2) gasoline inventories were +4.4% above the seasonal 5-year average, and (3) distillate inventories were -3.3% below the 5-year seasonal average.  US crude oil production in the week ending February 6 rose +3.8% w/w to a 14-month low of 13.713 million bpd, just below the record high of 13.862 million bpd from the week of November 7.

Baker Hughes reported last 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.
 

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