Week in Review: Trade Tensions, Inventories, & Pipeline Expansions Weigh on Crude

This week, prompt crude futures are on track for a weekly decline of nearly $4/bbl or over 4%. Earlier in the week, futures traded in negative territory due to concerns over rising U.S. crude inventories and trade tensions. U.S. crude stocks increased by 5 million barrels for the week ending January 31, contributing to downward pressure on prices.

U.S. sanctions targeting Iranian oil exports placed a bit of upward pressure on prices. The sanctions focus on individuals and tankers involved in shipping Iranian crude to China. Analysts believe these measures could reduce Iran’s oil exports by half. However, this momentum was offset by escalating trade tensions. President Trump announced a 10% tariff on Chinese imports, prompting China to retaliate with tariffs on U.S. oil, LNG, and coal. The ongoing trade conflict has raised fears of weaker global economic growth and declining oil demand.

Increased U.S. oil production also contributed to decreased prices. Trump’s commitment to raising domestic output, coupled with a significant rise in crude inventories, kept prices lower.

Refinery utilization rates remain in the mid-to-upper 80% range, influenced by both planned and unplanned refinery downtime. This figure is expected to climb to the mid-to-lower 90% range by early summer, aligning with the seasonal increase in gasoline demand. However, diesel balances will require close monitoring as production shifts.

Diesel markets saw localized supply tightness this week. Fog disruptions in the Gulf of Mexico created supply challenges in Florida, while the Virginia and Maryland region continues to face tight supply due to cold weather-driven demand and pipeline disruptions. Despite these pressures, the overall balance of diesel supply and demand remains stable, with days of supply holding in the low 30s.

Canadian pipeline operator Trans Mountain is considering short—and long-term expansion projects that could add 200,000 to 300,000 bpd of capacity to its system. The system currently carries up to 890,000 bpd from Alberta to Canada’s Pacific Coast for export. The pipeline, which accounts for 9% of Canada’s crude exports, has gained attention following U.S. President Trump’s threat to impose a 10% tariff on Canadian oil imports, a move he has temporarily paused for 30 days. If you missed our article on Trump’s executive orders and what they could mean for your fuel prices, you can read more about them here.

Trans Mountain is receiving increased interest from new shippers, particularly from Asian markets, amid tariff threats. Utilization of the pipeline has been rising, and the Canadian government, which owns the pipeline, supports the expansion efforts. Canadian Vice President Balasch expressed confidence that the pipeline can reach its full operating capacity, emphasizing that these expansion plans were underway even before the tariff situation heightened their importance.

Prices in Review

Crude opened on Monday at its highest for the week at $74.14 before beginning its downward trajectory. This morning, crude opened at $70.56, an overall decline of $3.58 or -4.82%.

Diesel opened on Monday at $2.4665 and saw steady declines throughout the week. This morning, diesel opened at $2.4051, a decrease of 6 cents or 2.49%.

On Monday, gasoline opened at $2.1188, its highest point for the week. This morning after marginal decreases over the week, gasoline opened at $2.0730, a decrease of 4 cents or 2.16%.