July WTI crude oil (CLN25) Thursday closed down -0.37 (-0.60%) and July RBOB gasoline (RBN25) closed down -0.0127 (-0.60%).

Crude oil and gasoline prices on Thursday fell to 1-week lows and settled lower.  Thursday's stronger dollar was bearish for energy prices.  Also, concerns about a global supply glut of crude oil undercut prices after Bloomberg reported that OPEC+ is considering another increase of +411,000 bpd in crude output when it meets on June 1.  In addition, crude has some negative carryover from Wednesday, when weekly EIA crude inventories unexpectedly rose to a 10-month high.  

Concern about a global oil glut is negative for crude prices after Bloomberg reported Thursday that OPEC+ is considering a crude production hike of 411,000 bpd for July.  On May 3, OPEC+ agreed to raise its crude production level by 411,000 bpd in June.  Saudi Arabia has 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.

Better-than-expected global economic news Thursday supported energy demand and crude prices.  The US May S&P manufacturing PMI unexpectedly rose +1.9 to 52.3 versus expectations of a decline to 49.9.  Also, US weekly initial unemployment claims unexpectedly fell -2,000 to a 1-month low of 227,000, showing a stronger labor market than expectations of an increase to 230,000.  In addition, the Eurozone May S&P manufacturing PMI rose +0.4 to a 2-3/4 year high of 49.4, stronger than expectations of 49.2.  Finally, the German May IFO business climate rose +0.6 to an 11-month high of 87.5, stronger than expectations of 87.3.

Escalating geopolitical risks in the Middle East may limit the downside in crude prices after CNN reported Wednesday that new US intelligence suggests Israel is preparing for a potential strike on Iranian nuclear facilities.  

Doubts about a nuclear deal between Iran and the US supported crude oil prices.  Iranian Supreme Leader Ali Khamenei said Tuesday that he doesn't think negotiations with the US will succeed, and he urged the Trump administration to stop "talking nonsense."  President Trump recently said Iran will face "something bad" if it doesn't quickly accept a US proposal over its nuclear program.

Crude has support on the outlook for smaller global oil supplies after the US State Department recently 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."

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.

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 +3.1% w/w to 90.97 million bbl in the week ended May 16.

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.  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 fell by -90,000 bpd w/w to 3.4 million bpd in the week to May 18.

Wednesday's EIA report showed that (1) US crude oil inventories as of May 16 were -5.6% below the seasonal 5-year average, (2) gasoline inventories were -2.2% 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 16 was unchanged w/w at 13.392 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 16 fell -1 to 473 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.