March WTI crude oil (CLH26) on Thursday closed down -1.85 (-2.84%), and March RBOB gasoline (RBH26) closed down -0.0386 (-1.96%).
Crude oil and gasoline prices fell sharply on Thursday after the dollar index (DXY00) rallied to a 1.5-week high. Also, US-Iran tensions eased, weighing on crude prices, after Iran confirmed it would hold talks with the US on Friday. In addition, today’s weaker-than-expected US labor market news was bearish for economic growth prospects and energy demand.
Crude prices came under pressure on Thursday after tensions eased between the US and Iran, when Iranian Foreign Minister Araghchi said that nuclear talks with the US would be held on Friday in Muscat, Oman. Crude prices spiked higher on Wednesday after Axios reported that the US told Iran it would not agree to Iran’s demands to change the location and format of talks scheduled for Friday. The development has heightened expectations that the US could proceed with military strikes against Iran, which could disrupt key shipping lanes as well as Iran’s 3.3 million bpd of crude production.
Thursday’s US labor news was weaker than expected, a bearish factor for economic growth, energy demand, and crude prices. Challenger Jan job cuts rose +117.8% y/y to 108,435, the largest amount of job cuts for a January since 2009. Also, weekly initial unemployment claims rose by +22,000 to an 8-week high of 231,000. In addition, the Dec JOLTS job openings unexpectedly fell by -386,000 to a 5.25-year low of 6.542 million, versus expectations of an increase to 7.250 million.
Last Thursday, crude oil rallied to a 5.75-month high after President Trump said that US ships he ordered to the Middle East were ready to fulfill their mission “with speed and violence, if necessary” if Iran fails to agree to a nuclear deal. An attack on Iran, OPEC’s fourth-largest producer, could disrupt the country’s crude supplies and potentially close the Strait of Hormuz, through which about 20% of the world’s oil passes.
Crude has support after President Trump said he would roll back tariffs on India in exchange for an agreement for India to stop buying Russian oil. Deliveries of Russian crude into Indian ports fell to about 1.2 million bpd in December, the lowest in more than three years.
An increase in crude exports from Venezuela is also boosting global oil supplies and is bearish for prices. Reuters reported on 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.
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. On January 13, the EIA raised its 2026 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month, and cut its US 2026 energy consumption estimate to 95.37 (quadrillion btu) from 95.68 last month.
Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -6.2% w/w to 103.00 million bbl in the week ended January 30.
On Sunday, 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 December crude production rose by +40,000 bpd to 29.03 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 EIA report showed that (1) US crude oil inventories as of January 30 were -4.2% below the seasonal 5-year average, (2) gasoline inventories were +3.8% above the seasonal 5-year average, and (3) distillate inventories were -2.2% below the 5-year seasonal average. US crude oil production in the week ending January 30 was down -3.5% w/w to a 14-month low of 13.215 million bpd, moderately 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 January 30 was unchanged at 411 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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