The Market Settled at its Lowest Level Since February 2021

Recap: The oil market rebounded on Tuesday on some bargain hunting after the market settled at its lowest level since February 2021 in light of the OPEC+ decision to further accelerate oil production hikes for a second consecutive month. The crude market posted a low of $57.03 and quickly rebounded and backfilled Monday’s remaining gap from $57.70 to $57.74. It continued to trend higher and retraced almost 50% of its move from a high of $64.87 to a low of $55.30 as it posted a high of $59.84 in afternoon trading. The market was supported by signs that production from the U.S. may contract in the months ahead. Diamondback Energy cut its full-year production forecast and said it expects U.S. shale production to fall in the coming months. The market was also supported by Middle East tensions, with Israel’s military conducting airstrikes against targets in Yemen after the Houthi rebels launched a ballistic missile that struck near Israel’s main airport. The crude market later settled in a sideways trading range ahead of the close. The June WTI contract ended the session up $1.96 at $59.09 and the July Brent contract settled up $1.92 at $62.15. The product markets ended the session higher, with the heating oil market settling up 3.43 cents at $2.0088 and the RB market settling up 4.17 cents at $2.0645.

Technical Analysis: The crude market on Wednesday will likely continue trading within its recent trading range, holding its support amid the expected draws across the board in the weekly petroleum stocks reports. The inventory reports are expected to show draws of 1 million barrels in crude stocks. The oil market will also remain range bound ahead of the Federal Reserve’s interest rate policy announcement on Wednesday afternoon. The market is seen finding resistance at its high of $59.84-$59.87, $60.12, $60.74, $61.22 and $62.07. Support is seen at $57.03, $55.30, $54.67 and $51.64.

Fundamental News: The EIA stated in its Short Term Energy Outlook that perceptions of oversupply among oil market participants from increasing OPEC+ output and uncertainty about the economic impact of tariffs have raised short-term oil price volatility. The EIA sees world oil demand of 103.7 million bpd in 2025, down 0.01% from a previous forecast. It forecast global oil demand in 2026 increasing by 0.87% on the year to 104.6 million bpd, which is down 0.01% from a previous estimate. World oil output in 2025 is forecast at 104.1 million bpd, unchanged from a previous forecast, while output is expected to increase by 1.25% on the year to 105.4 million bpd, which is up 0.01% from a previous estimate. U.S. crude oil output is estimated at 13.42 million bpd in 2025, which is down 0.67% from a previous forecast and is expected to increase by 0.52% to 13.49 million bpd in 2026, which is down 0.52% from a previous forecast. Meanwhile, U.S. oil demand is forecast at 20.5 million bpd in 2025, up 0.5% from a previous estimate and fall by 0.5% to 20.4 million bpd in 2026, which is also up 0.5% from a previous forecast. The EIA sees the average Brent crude price in 2025 at $65.85/barrel, down from a previous forecast of $67.87/barrel while the average Brent price in 2026 is estimated at $59.24/barrel, down from a previous forecast of $61.48/barrel. The price of WTI crude is forecast at $61.81/barrel in 2025, down from a previous forecast of $63.88/barrel, while the price in 2026 is seen at $55.24/barrel, down from a previous estimate of $57.48/barrel.

Bloomberg reported that China halted purchases of U.S. crude in March as trade tensions between the two countries escalated. According to data from the U.S. Census, the lack of such purchases by China compares with imports of 149,000 bpd of U.S. crude in February. China’s declining demand for U.S. crude is bad news for shale producers, which already are warning that U.S. production is set to decline amid a prolonged period of low oil prices due to lower demand and increased OPEC output.

A fourth round of nuclear talks between Iran and the United States is likely to take place over the weekend in the capital of Oman, with Iranian state media pointing to May 11^th as a probable date.

Early Market Call – as of 8:55 AM EDT

WTI – Jun $59.19, up 19 cents

RBOB – Jun $2.0533, down 52 points

HO – Jun $1.9999, down 61 points

Download Attachment

This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.