Crude oil and gasoline prices took a significant hit on Wednesday, with December WTI crude oil closing down -2.14% and December RBOB gasoline closing down -3.36%. The main factors contributing to this decline were the rally in the dollar index to a 2-week high and reports of secret collaboration between the Trump administration and Russia to end the war in Ukraine.
Furthermore, a mixed EIA inventory report added to the downward pressure on energy prices. While weekly crude supplies fell more than expected, gasoline and distillate stockpiles saw larger-than-expected increases. Oil prices, however, found some support from news of reduced crude exports from Russia. Vortexa data revealed that Russia’s oil product shipments fell to their lowest levels in over 3 years in the first 15 days of November.
Geopolitical tensions also played a role in supporting oil prices, with ongoing risks related to Russia, Iran’s seizure of an oil tanker in the Gulf of Oman, and the US military buildup in preparation for a potential attack on Venezuela.
On the supply side, OPEC revised its Q3 global oil market estimates from a deficit to a surplus, citing higher-than-expected US production and increased crude output from OPEC. The EIA also raised its 2025 US crude production estimate, further contributing to the outlook of a global surplus.
In response to the emerging surplus, OPEC+ announced a production increase of +137,000 bpd in December but planned to pause production hikes in Q1-2026. The IEA forecasted a record global oil surplus for 2026, prompting efforts to restore production cuts made in early 2024.
The latest EIA report showed a mixed picture for crude oil and products, with gasoline and distillate stockpiles rising more than expected while crude inventories fell by a larger margin than anticipated. US crude oil production slightly decreased, and the number of active oil rigs rose slightly but remained above recent lows.
Overall, the energy market remains volatile, with a mix of supply dynamics, geopolitical tensions, and economic factors influencing price movements. It will be essential to monitor these developments closely to gauge the future direction of oil and gasoline prices.
