Daily Energy Market Update June 3, 2025

WTI is up 80 cents     RB is up 1.49 cents     ULSD is up 2.96 cents

Energy prices are higher, trading in tight ranges overnight as geopolitical tensions are seen underpinning prices. The Russia/Ukraine war heated up over the weekend and an Iranian/U.S. nuclear deal seems unlikely at present. Additionally , the wildfires in Canada have shut in production.

Ukraine and Russia at the weekend ramped up the war with one of the biggest drone battles of their conflict. (Reuters)

Iran is on the brink of rejecting U.S. proposals on the future of its nuclear programme after the U.S. draft insisted that Tehran would have to suspend the enrichment of uranium inside Iran and set out no clear route map for lifting U.S. economic sanctions. If the nuclear talks fail, it could mean continued sanctions on Iran, which would limit Iranian supply and be supportive of oil prices. (The Guardian/Reuters)

Canadian heavy crude price discounts tightened on June 2 as wildfires sweeping across northern Canada caused producers to shut in nearly 350  MBPD of output, equal to 7% of Canada's total output. Bloomberg reports that 470 MBPD of production is at risk. Western Canadian Select at Hardisty, Alberta, traded at as narrow as $8.50/b discount to WTI early June 2, versus a $9.75/b discount on May 26. The loss of Canadian heavy crude is seen impacting Gulf Coast refiners quite a bit as supply of heavy crude from Venezuela has been curtailed due to U.S. sanctions. Platts puts the amount of Venezuelan crude lost to the Gulf Coast at 200 MBPD. Canadian oil producer Cenovus Energy declared force majeure on its supply of Christina Lake Dil-bit heavy crude due to Alberta wildfires according to Reuters sources on Monday.

The Organization for Economic Cooperation and Development (OECD) on Tuesday lowered its growth forecasts for the world economy and the U.S., only three months after its last downgrade. The OECD cut its global growth estimates for 2025 and 2026 to 2.9%, versus 3.1% and 3% previously. U.S. growth forecasts were cut more. The 2025 growth is seen at +1.6% now, versus the prior forecast of +2.2%; in 2026, growth is seen at +1.5%, versus the prior forecast 0f +1.6%. "Unsurprisingly," trade barriers are behind the reduction in the growth estimates. The OECD warned that the impact of tariffs on import prices to the U.S. could force inflation to almost 4%.  (Market watch)

U.S. manufacturing activity sank a little deeper into contraction in May, reflecting persistent worries over the impact of the Trump administration's whipsawing trade policy. The Institute for Supply Management (ISM) said Monday that its purchasing managers' index of manufacturing activity fell to 48.5 in May, from 48.7 in April, matching a consensus of economists polled by The Wall Street Journal.

ADNOC will cut Murban crude exports by up to 177 MBPD through May 2026, reallocating supply to their Ruwais refinery. That refinery complex has a capacity of 837 MBPD, making it the fourth-largest single-site oil refinery in the world and the biggest in the Middle East. ADNOC plans to export 1.705 MMBPD of Murban Crude in August, down by 65 MBPD compared to the previous schedule, Reuters reports, citing an ADNOC report. On the news from ADNOC on Monday, spot premiums for Murban surged, while Dubai crude weakened following OPEC+'s decision to increase output by 411 MBPD in July.   (Oil Price/Wikipedia) 

The argument has been made the past few days that, while OPEC+ has consistently raised its production targets, actual export volumes have not always kept pace. OPEC+ maintains that the global oil market fundamentals remain healthy, citing low inventories as evidence. However, data from the OECD shows that crude inventories in developed countries actually rose by 21.4 MMBL in March to a total of 1.323 billion barrels. Despite this rise, inventories are still 139 MMBBL below the pre-COVID average from 2015 to 2019. (Reuters)

But, data from intelligence company Kayrros says that crude oil stockpiles globally rose by about 170 MMBBL in the past 100 days. Data from OilX, part of consultant Energy Aspects, shows they’ve been swelling since February. Kayrros says that the increase in global oil stocks is being led by China. On average, OilX data show crude stockpiles growing at the fastest pace since 2020 in the three months through April, while the amount of crude oil sailing the world’s oceans recently hit the highest level since April 2024, according to Vortexa data. The second quarter of 2025 “has so far seen global crude inventories build 1.5 million barrels a day faster through the middle of May compared to the same period last year,” RBC Capital Markets wrote in a note. “We are just now beginning to see true physical sloppiness reflect consensus bearish balances.”In contrast to crude-stockpile builds, OilX saw declines in refined fuel inventories over February, March and April, while the US EIA reported diesel inventories at the lowest level since 2005 last week.   (Bloomberg)

Kazakhstan has informed OPEC that it does not intend to reduce oil production, Russia's Interfax news agency reported on Thursday, citing Kazakhstan's deputy energy minister. (Reuters)

A Reuters article indicates that Russia and Saudi Arabia had to reach a difficult compromise on OPEC+ policies on Saturday as Riyadh pushed to accelerate oil output increases while Moscow argued for a pause. Before the Saturday meeting, Saudi Arabia lobbied OPEC+ to increase output by more than 411 MBPD, so as to punish overproducers in OPEC+. Russia as well as fellow OPEC+ members Oman and Algeria advocated for a pause in production hikes as they argued that demand might not be strong enough to consume the additional supply.

Morgan Stanley commodity analysts expect OPEC+ to make three new monthly boosts to its output, returning all 2.2 million bpd it agreed to remove from the market in 2022, by October. (Oil Price)

Some of Monday's rally in crude prices was seen as short covering. In the week to May 27, hedge funds and other money managers held a 257,000-contract gross short in the three major WTI and Brent contracts, which was an 8-month high and a level that has only been briefly exceeded five times since 2020, as per one bank analyst.

The US government plans to sell a 1 MMBBL reserve of diesel fuel from the Northeast Home Heating Oil Reserve. This diesel fuel reserve, created under President Bill Clinton, has been unused except for emergency use during Hurricane Sandy in 2012. The sale is expected to generate $100 million for deficit reduction and requires Congressional approval, similar to a previous sale of gasoline from an emergency reserve. (Bloomberg)

RB July futures see support at 2.0428-2.0431 and then at 2.0151-2.0164. Resistance is seen at 2.1038-2.1051 and then at 2.1230-2.1246. The 50,100 and 200 day moving averages on the DC chart intersect respectively at 2.1064, 2.0988 and 2.0621.

ULSD support for the spot futures is seen at 2.0261-2.0283. Resistance comes in at 2.1177-2.1184.