July WTI crude oil (CLN25) Wednesday closed up +0.95 (+1.56%), and July RBOB gasoline (RBN25) closed up +0.0152 (+0.74%).

Crude oil and gasoline prices rallied Wednesday on concern the US might ramp up sanctions on Russian crude exports since Russian President Putin refuses to agree to a ceasefire with Ukraine.  Crude oil also has support from recent reports that Israel might be preparing to strike Iran's nuclear facilities.  

Crude oil prices were being undercut Wednesday by strength in the dollar and expectations that OPEC+ will increase crude output for July when it meets this Saturday.

Crude oil found support from comments from President Trump, who said that Russian President Putin was "playing with fire" for his continued attacks on Ukraine.  CNN reported Tuesday that Mr. Trump could move ahead with new sanctions on Russia in the coming days.  Also, Senator Graham said he has the votes in Congress to pass a sweeping sanctions bill against Russia that would slap a 500% tariff on any country that buys Russian energy products.

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

Concern about a global oil glut is negative for crude prices, following Bloomberg's report last Thursday that OPEC+ is considering a 411,000 bpd crude production hike for July when it meets on May 31.  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.

Doubts about a nuclear deal between Iran and the US supported crude oil prices.  Iranian Supreme Leader Ali Khamenei said last 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."

A decline 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 fell by -4.2% w/w to 95.40 million bbl in the week ended May 23.

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.

The consensus is that Thursday's weekly EIA crude inventories will fall by -400,000 bbl, and gasoline supplies will climb by +550,000 bbl.

Last 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 23 fell by -8 to a 3-1/2 year low of 465 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.