July WTI crude oil (CLN25) today is down -2.42 (-3.32%), and July RBOB gasoline (RBN25) is down -0.0238 (-1.07%).

Crude oil prices surged by +5% initially on Sunday night as the Israel-Iran conflict entered its fourth day.  However, crude prices gave up their advance and fell sharply on hopes that the conflict will be contained and that damage will be minimal for Iran's oil-exporting infrastructure.  Losses in crude accelerated today on a news report that said Iran wants to cease hostilities and restart talks over its nuclear program.

However, hostilities between Israel and Iran entered a fourth day with no signs of easing.  Iran fired several waves of drones and missiles over the past 24 hours, while Israel continued hitting Tehran, killing more senior military officials.

Crude prices sank today after the Wall Street Journal reported that Iran seeks an end to hostilities and wants a resumption of talks over its nuclear program.  The Iranian government told Arab officials it would be open to return to the negotiating table as long as the US doesn't join the attack.  The Iranian government also sent messages to Israel saying it is in the interest of both sides to keep the violence contained.  However, Israeli Prime Minister Netanyahu has said the attacks will continue until Iran's nuclear program and ballistic missiles are destroyed, and he has shown no indication he is ready to stop.

Gains in crude oil prices from the Israel-Iran war are limited by the fact that OPEC+ members have excess capacity, which they can use to boost oil production in the event of a disruption in supplies from the Persian Gulf.  The International Energy Agency can also coordinate the release of emergency stockpiles if necessary.

Oil prices continue to be undercut by tariff concerns after President Trump last Wednesday said he intends to send letters to dozens of US trading partners in one to two weeks, setting unilateral tariffs ahead of the July 9 deadline that came with his 90-day pause.  Mr. Trump's comments have sparked uncertainty about global trade, which may depress global economic activity and energy demand.  By contrast, reduced US-China tensions were positive for economic growth and energy demand after President Trump last Wednesday said that a trade deal with China was "done," with a plan to revive the flow of sensitive goods between the countries.

Crude prices were undercut after Bloomberg recently reported that Saudi Arabia is open to additional crude production hikes in a bid to increase its market share.  The report stated that Saudi Arabia wants OPEC+ to increase crude output by 411,000 bpd in August and potentially in September to capitalize on peak summer demand.

A decline in crude oil held worldwide on tankers is bullish for oil prices.  Vortexa reported today that crude oil stored on tankers that have been stationary for at least seven days fell by -7.2% w/w to 73.97 million bbl in the week ended June 13.

Concern about a global oil glut is negative for crude prices.  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.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of June 6 were -8.3% below the seasonal 5-year average, (2) gasoline inventories were -1.9% below the seasonal 5-year average, and (3) distillate inventories were -17.5% below the 5-year seasonal average.  US crude oil production in the week ending June 6 rose +0.1% w/w at 13.428 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 June 13 fell by -3 to a 3-3/4 year low of 439 rigs.  Over teh past 2-1/2 years, the number of US oil rigs has fallen from the 5-1/4 year high of 627 rigs posted in December 2022.