September WTI crude oil (CLU25) on Wednesday closed down -0.81 (-1.24%), and September RBOB gasoline (RBU25) closed down -0.0011 (-0.05%).

Crude oil and gasoline prices gave up an early rally Wednesday and turned sharply lower after President Trump said "great progress was made" in a meeting between US envoy Witkoff and Russian President Putin on ending the war in Ukraine, which sparked long liquidation in crude on speculation that the US will not add secondary sanctions to Russian energy exports.  

Crude prices on Wednesday initially moved higher after the dollar index (DXY00) fell to a 1-week low.  Crude also rose after Saudi Arabia's state producer, Saudi Aramco, raised the price for its Arab Light crude to Asian customers by $1 a barrel for September delivery, above expectations of a 90-cent-a-barrel increase.  Wednesday's weekly EIA report was also bullish for crude prices.  

Crude prices have support after President Trump said last Monday that he would impose new tariffs on countries buying Russian energy unless Russia reaches a ceasefire with Ukraine by this Friday.   JPMorgan Chase warned that if enforced, oil markets would be unable to ignore the impact of triple-digit tariffs on Russian oil, given the significant scale of Russian exports and limited OPEC spare capacity, which could potentially lead to a supply shock.    

Concerns about a global oil supply glut are weighing on crude prices after OPEC+ on Sunday endorsed an additional 547,000 bpd increase in its crude production for September 1.  OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production by September 2026.  After Sunday's meeting, the group said it will closely monitor demand and may maintain production levels, restart halted supplies, or reverse recent production increases.  OPEC+ has 1.66 million bpd of supplies that are currently due to remain offline until late 2026.  The International Energy Agency said inventories have been accumulating at a rate of 1 million bpd and that the global crude oil market faces a surplus by Q4-2025 equivalent to 1.5% of global crude consumption.  OPEC July crude production fell -20,000 bpd to 28.31 million bpd.

The European Union recently approved fresh sanctions on Russian oil due to its aggression against Ukraine.  The sanctions package includes cutting off 20 more Russian banks from the international payments system SWIFT, as well as restrictions imposed on Russian petroleum refined in other countries.  A large oil refinery in India, part-owned by Russia's Rosneft PJSC, was also blacklisted.  Additionally, 105 more ships in Russia's shadow fleet were sanctioned, pushing the number of sanctioned ships above 400.

A decline in crude oil held worldwide on tankers is bullish for oil prices.  Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -15% w/w to 79.12 million bbl in the week ended August 1.

Wednesday's weekly EIA report was bullish primarily for crude oil and products.  On the bullish side, EIA crude inventories fell -3.03 million bbl, a larger draw than expectations of -2.6 million bbl.  Also, EIA gasoline supplies fell by -1.3 million bbl, a larger draw than expectations of -1.0 million bbl.  In addition, EIA distillate stockpiles unexpectedly fell by -565,000 bbl versus expectations of a +811,000 bbl increase.  On the negative side, crude supplies at Cushing, the delivery point of WTI futures, rose by +453,000 bbl.  

Wednesday's weekly EIA report showed that (1) US crude oil inventories as of August 1 were -6.5% below the seasonal 5-year average, (2) gasoline inventories were -0.3% 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 August 1 fell -0.2% w/w to 13.284 million bpd, modestly below the record high of 13.631 million bpd posted in the week of 12/6/2024.

Baker Hughes reported last Friday that the number of active US oil rigs in the week ending August 1 decreased by -5 rigs to a new 3.75-year low of 410 rigs.  Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.25-year high of 627 rigs reported in December 2022.