Posted on:
May 21, 2025

U.S. trucking activity: For a second consecutive month, the For-Hire Truck Tonnage Index fell as April saw a 0.3% drop after March had declined 1.5%. Bob Costello, chief economist for the American Trucking Associations (ATA), indicated “unfortunately, a recovery that was expected this year hasn’t transpired as the industry deals with a freight market in flux from tariffs and softening economic indicators.” The truck freight market has been in a two-year recession. ATA’s index is calculated based on surveys of the group’s 37,000 members and can be considered a barometer of the U.S. economy as is responsible for 72.7% of tonnage carried by all modes of domestic freight transportation.

Kazakhstan: OPEC member Kazakhstan reported a 3% decrease in oil output during April which still exceeded its quota with the Organization of the Petroleum Exporting Countries and allies (or OPEC+). Now, in May 1st-19th period, oil production is averaging 1.86 million barrels per day (bpd) which is up 2% despite pressure from OPEC+ to reduce output. The Central Asian country is indicating difficulty in telling companies such as Exxon Mobil and Chevron that they need to lessen plans. Yet, recent speeding up of output increases by OPEC+ is in part to put pressure on international oil prices which will result in some pain to members not complying. Kazakhstan’s OPEC+ quota for May is 1.486 million bpd.

U.S. inventory: The American Petroleum Institute (API) released weekly data yesterday and crude oil was showing a surprise build of 2.5 million barrels when a drawdown of more than 1 million barrels was the expectation. Products both showed declines as distillate stocks fell by 1.4 million barrels and gasoline had most significant movement as those inventories were off by 3.2 million barrels (compared to anticipated 524,000 barrel draw). The U.S. Energy Information Administration (EIA) will release its weekly detail later this morning.

Market Overview: Movement is higher today on news from U.S. intelligence suggesting Israel is preparing to strike Iranian nuclear facilities which is causing fear of crude oil supply disruptions. WTI crude did get to as high as $64.19 overnight with market not quite being able to hold onto those levels but is still up over 1%. This morning’s EIA inventory report will also be watched closely as traders particularly will be interested to see where crude stocks are showing after API’s surprise crude build. Farming activity has slowed greatly this week with much needed widespread rain event.

Global oil production

The plan by OPEC+ to ramp up oil output has a secondary objective of taking on U.S. shale production and winning back market share from the U.S. The last price war (about a decade ago) proved U.S. producers as tough competition with breakthroughs in technology and drilling allowing the ability to compete at lower prices and continually take market share in year’s since (as chart above shows increase from 15% in 2014 to 22% in 2024). The current environment does lend to some vulnerabilities as U.S. shale producers have seen costs rise overpast three years and income shrinking due to declining global oil prices. To truly hurt shale producers currently, prices would need to be pushed below $55-$60 per barrel to curtail U.S. growing global market share.

The day began with a decided move to higher ground as news had emerged that Israel was planning an attack on Iranian nuclear facilities even though it is not really clear if Israeli leaders had made a final decision. Then, the complex eased as morning EIA inventory report showed some bearishness with crude and both products showing builds when drawdowns were the expectation. At the settle, the contracts were mixed with following movement: WTI crude contract lost some ground as was off $0.46 (to $61.57) and RBOB gasoline also finished slightly weaker as lost $0.0023 (to $2.1498) while ULSD distillates moved up $0.0102 (to $2.1391). In addition, recent U.S.-Iran nuclear talks haven't really produced much progress but they will continue as next round is slated for May 23rd in Rome.