August WTI crude oil (CLQ25) on Thursday closed down -1.81 (-2.65%), and August RBOB gasoline (RBQ25) closed down -0.0355 (-1.62%).
Crude oil and gasoline prices on Thursday settled sharply lower. Thursday's rally in the dollar index (DXY00) to a 2-week high pressured most commodity prices, including crude. Also, a report from Bloomberg on Thursday stating that OPEC+ is discussing a pause in its oil production increases from October is fueling concerns about a slowdown in global energy demand. In addition, the intensification of US tariffs risks slowing global economic growth and energy demand after President Trump ramped up tariffs on numerous countries this week, including a 50% tariff on Brazil.
Bloomberg reported Thursday that OPEC+ is discussing a pause in further production increases from October, following its next monthly hike in September of 548,000 barrels. OPEC+ may be concerned about a slowdown in global oil demand in the second half of this year that could lead to a supply glut if the group keeps boosting production. The International Energy Agency said inventories have been accumulating at a rate of 1 million bpd, and global markets face a surplus equivalent to 1.5% of global crude consumption in Q4 of this year.
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.
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.