August WTI crude oil (CLQ25) today is up +1.41 (+2.17%), and August RBOB gasoline (RBQ25) is up +0.0380 (+1.84%).
Crude oil and gasoline prices are sharply higher today due to the decline in the dollar index (DXY00) to a 3-1/4 year low. Also, today’s rally in the S&P 500 to a 4-month high shows confidence in the economic outlook, which is supportive for energy demand and crude prices. Crude oil also has carryover support from Wednesday’s EIA report, which showed a larger-than-expected draw in crude oil inventories and a surge in US gasoline demand to a 3-1/2 year high.
Crude oil prices have underlying support after US and European intelligence reports suggest that Iran still has all or some of its stockpile of 60% enriched uranium even after the US bombing, which means that there will be continued pressure on Iran for a nuclear-inspection agreement and continued sanctions until that agreement happens. However, the US and Iran have talks scheduled for next week, and the US may nevertheless gloss over the enriched uranium problem and offer to reduce or eliminate sanctions.
Concern about a global oil glut is negative for crude prices. On Wednesday, Russia stated that it is open to another output hike for OPEC+ crude production in August, when the group meets on July 6. 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.
Gasoline prices have support from the American Automobile Association (AAA) projection that a record 61.6 million people will travel by car this Fourth of July holiday (June 28 to July 6), up +2.2% from last year and a sign of stronger gasoline demand.
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