July WTI crude oil (CLN25) Wednesday closed up +3.17 (+4.88%), and July RBOB gasoline (RBN25) closed up +0.0788 (+3.77%).

Crude oil and gasoline prices rallied sharply on Wednesday, with crude posting a 2-1/4 month high and gasoline posting a 3-week high.  Wednesday's weaker dollar was supportive of energy prices.  Also, comments from President Trump boosted crude prices when he announced a trade deal with China and expressed doubts about nuclear talks with Iran.  

Crude prices surged to their highs Wednesday afternoon when Reuters reported that the US embassy in Iraq is preparing to be evacuated because of rising security risks.  Iraq is the second-largest OPEC producer.  Tensions in the region have increased this week as talks between the US and Iran over its advancing nuclear program appear to have hit an impasse.  President Trump said Wednesday that he's "less confident" about convincing Iran to shut down its nuclear program, which could limit global oil supplies as export restrictions on Iranian crude are kept in place.

The easing of trade tensions between the US and China is positive for economic growth and energy demand.  President Trump said Wednesday that a trade deal with China was "done," with a plan to revive the flow of sensitive goods between the countries.

Crude prices were undercut last Wednesday after Bloomberg reported that Saudi Arabia is open to additional crude production hikes in a bid to increase its market share.  The report stated that Saudi Arabia wants OPEC+ to increase crude output by 411,000 bpd in August and potentially in September to capitalize on peak summer demand.

Signs of a global oil supply glut are weighing on crude prices, as crude oil inventories have risen by 170 million barrels over the past 100 days, according to Kayrros, which monitors inventories.

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 +9.1% w/w to 81.83 million bbl in the week ended June 6.

Concern about a global oil glut is negative for crude prices.  On May 31, OPEC+ agreed to a 411,000 bpd crude production hike for July after raising output by the same amount for 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 May crude production rose +200,000 bpd to 27.54 million bpd.

Wednesday's weekly EIA crude report was mixed for crude and products.  On the bullish side, EIA crude inventories fell -3.64 million bbl, a larger draw than expectations of -2.6 million.  Also, crude supplies at Cushing, the delivery point of WTI futures, fell by -403,000 bbl.  On the bearish side, EIA gasoline stockpiles rose +1.5 million bbl, a larger build than expectations of +750,000 bbl.  Also, distillate supplies rose +1.2 million bbl, a larger build than expectations of +700,000 bbl.

Wednesday's EIA report showed that (1) US crude oil inventories as of June 6 were -8.3% below the seasonal 5-year average, (2) gasoline inventories were -1.9% below the seasonal 5-year average, and (3) distillate inventories were -17.5% below the 5-year seasonal average.  US crude oil production in the week ending June 6 rose +0.1% w/w at 13.428 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 June 6 fell by -9 to a 3-1/2 year low of 442 rigs.  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.