Just watched crude oil trading hit some wild numbers on Thursday. WTI April futures jumped 8.51% closing up 6.35, while RBOB gasoline climbed 6.20%. We're looking at a 19.5-month high for crude and 1.75-year high for gasoline. The reason is pretty straightforward if you've been following the Middle East situation.

The war there just entered its sixth day with no resolution in sight, and the Strait of Hormuz is basically locked down. That passageway handles about a fifth of the world's oil, so you can imagine what that does to global crude oil trading flows. Iran's Revolutionary Guard warned ships about potential missile and drone risks, which is effectively keeping tankers away. Most energy shipments from the Persian Gulf are halted.

China actually told its largest refiner to suspend diesel and gasoline exports because of the escalating conflict. That's tightening global fuel supplies even more. Meanwhile, Saudi Arabia and Iraq, OPEC's biggest producers, had to cut production because their storage tanks are filling up fast with crude they can't ship out. Kayrros reported that four of six tanks at Saudi's Ras Tanura refinery were already full.

There's also the damage from an Iranian drone attack that hit the UAE's Fujairah terminal on Tuesday, one of the biggest oil storage hubs in the region. And Saudi Arabia had to shut down its largest refinery, Ras Tanura, which processes 550,000 barrels per day. Goldman Sachs is pricing in an 18 dollar per barrel risk premium based on what a six-week halt to Strait of Hormuz tanker traffic would mean.

Now here's the thing about crude oil trading right now though. There are some bearish headwinds too. OPEC+ announced it's boosting output by 206,000 bpd in April, more than expected. They're trying to restore production cuts from early 2024 but still have about 1 million bpd left to bring back. Plus, there's a ton of Russian and Iranian crude sitting in floating storage on tankers, about 290 million barrels, which is 50% higher than a year ago due to blockades and sanctions.

Venezuelan exports are also ramping up, hitting 800,000 bpd in January compared to 498,000 in December. That adds to global supply pressure. The EIA raised its 2026 US production estimate to 13.60 million bpd and energy consumption to 96.00 quadrillion BTU. Meanwhile, the IEA cut its 2026 global crude surplus estimate to 3.7 million bpd from 3.815 million.

The Russia-Ukraine situation is keeping restrictions on Russian crude in place, which supports prices. Ukrainian attacks on Russian refineries and tankers over the past months have limited Moscow's export capabilities. New US and EU sanctions are adding more pressure on Russian oil companies and infrastructure.

As of late February, US crude inventories were 2.7% below the seasonal average, gasoline was 4.4% above average, and distillate was 1.9% below average. US production stayed flat at 13.696 million bpd. Active oil rigs fell to 409, just above a 4.25-year low.

So crude oil trading right now is caught between serious geopolitical supply disruptions pushing prices up and mounting global inventory pressures pushing them down. The Middle East situation is the immediate wildcard. If the Strait of Hormuz stays closed, we could see even more volatility.