August WTI crude oil (CLQ25) on Wednesday closed up +0.05 (+0.07%), and August RBOB gasoline (RBQ25) closed up +0.0029 (+0.13%).

Crude oil and gasoline prices extended this week's rally and posted 2-week highs, but settled only slightly higher.  Comments from the UAE Energy Minister on Wednesday boosted crude prices when he stated that a lack of major inventory buildups indicates that the oil market requires larger OPEC+ output.  Crude prices also found support Wednesday after Saudi Arabia's state-run Aramco stated that it sees "healthy global oil demand," despite the impact of tariffs on the global economy.  However, crude prices gave up most of their advance after weekly EIA crude inventories unexpectedly increased.  

Heightened tensions in the Middle East are supportive of crude prices after Yemen's Houthi rebels attacked another merchant ship in the Red Sea on Tuesday, the second such attack following Sunday's attack on a vessel sailing through the Red Sea.  The attacks on shipping could boost freight rates and insurance costs for shippers, making crude supplies from the Middle East more expensive.  The attacks have already prompted retaliatory strikes by Israeli jets on Houthi targets and could prompt strikes from the US as well.

Concern about a global oil glut is negative for crude prices.  On Sunday, OPEC+ agreed to raise its crude production by 548,000 barrels per day (bpd) beginning August 1, exceeding expectations of a 411,000 bpd increase.   Saudi Arabia also stated that additional similar-sized increases in crude output could follow, which is viewed as a strategy to reduce oil prices and penalize 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 by September 2026.  On May 31, OPEC+ agreed to a 411,000 bpd increase in crude production for July, following the same 411,000 bpd hike for June.  June crude production rose +360,000 bpd to a 1.5-year high of 28.10 million bpd.

Oil prices continue to be undercut by tariff concerns as President Trump vowed to push forward with his aggressive tariff regime, stressing he would not offer additional extensions on country-specific tariffs set to take effect on August 1.  

An increase 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 rose by +3.6% w/w to 79.55 million bbl in the week ended July 4.

Wednesday's weekly EIA report was mixed for crude and products.  On the positive side, EIA gasoline supplies fell by -2.7 million bbl, a larger draw than expectations of -1.0 million bbl.  Also, EIA distillate stockpiles fell -825,000 bbl to a 20-year low, although a smaller draw than expectations of -1.5 million bbl.  Conversely, EIA crude inventories fell by -7.1 million bbl, a larger draw than expectations of -1.6 million bbl.   Also, crude supplies at Cushing, the delivery point of WTI futures, rose by +464,000 bbl.

Wednesday's EIA report showed that (1) US crude oil inventories as of July 4 were -8.0% below the seasonal 5-year average, (2) gasoline inventories were -1.2% below the seasonal 5-year average, and (3) distillate inventories were -23.6% below the 5-year seasonal average.  US crude oil production in the week ending July 4 fell -0.4% w/w to 13.385 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.

Baker Hughes reported last Thursday that active US oil rigs in the week ending July 4 fell by -7 to a 3.75-year low of 425 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.