Feb WTI crude oil (CLG23) this morning is up +0.56 (+0.70%), and Feb RBOB gasoline (RBG23) is up +4.26 (+1.69%). Â Feb Nymex natural gas (NGG23) is down -0.055 (-1.66%).
Crude oil and gasoline prices this morning are moderately higher. Â Crude oil prices are seeing support from a weaker dollar and expectations for Chinese energy demand to strengthen as China's economy reopens from pandemic lockdowns. Â However, crude fell back from its best levels after weekly EIA crude inventories unexpectedly rose to a 1-1/2 year high. Â
Feb nat-gas this morning slipped to a 19-month nearest-futures low. Â A smaller-than-seasonal drop in weekly nat-gas supplies weighed on prices. Â The EIA reported today that weekly nat-gas inventories fell -82 bcf, more than expectations of -76 bcf but much less than the 5-year average for this time of year of -156 bcf. Â Losses in nat-gas prices are limited after Maxar Technologies said colder-than-normal temperatures are expected across the western, central, and southern U.S. from Jan 24-28, which will boost heating demand for nat-gas.
Strength in the crude crack spread is positive for oil prices after the crack spread today climbed to a 1-3/4 month high. Â The higher crack spread encourages refiners to boost their crude purchases to refine it into gasoline and distillates.
Crude prices have support as the removal of pandemic travel restrictions has bolstered expectations for a jump in domestic and international flights in China during the week-long Lunar New Year that begins on January 21.
China boosted its crude import quotas last Monday, a sign from the world's largest crude importer that it is gearing up to meet higher demand. Â As of this week, China has issued a combined 132 million metric tons (MMT) of quotas for crude imports in 2023, well above the quota for 109 MMT at the same time last year. Â Â Â
In a note to clients Monday, Goldman Sachs said oil market participants are preparing for a recession that is unlikely to materialize, and oil markets are unprepared for the sequential demand growth this year as China reopens and travel continues to recover. Â As a result, Goldman Sachs predicts Brent crude will reach $105 a bbl by Q4 and average $97.50 a bbl this year. Â
Increased OPEC crude output is bearish for oil prices. Â OPEC Dec crude production rose +150,000 bpd to 29.140 million bpd. Â OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations. Â OPEC+ will meet again on February 1 to discuss its production targets.
Crude oil prices found support after Russia's Deputy Prime Minister Alexander Novak said in late December that Russia might cut production by 500,000-700,000 bpd in response to Europe’s partial oil embargo on Russian oil imports.  The European embargo is having a significant impact, as Bloomberg reports that total oil shipment volume from Russia in mid-December fell sharply by -54%.
In a bullish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week fell -8.9% w/w to 85.39 million bbl in the week ended January 13.
Today's weekly EIA inventory report was mostly bearish for energy prices. Â EIA crude inventories unexpectedly rose +8.41 million bbl to a 1-1/2 year high versus expectations of a -3.0 million bbl draw. Â Also, EIA gasoline supplies rose +3.48 million bbl to an 8-1/2 month high, above expectations for a +2.4 million bbl build. Â In addition, crude stockpiles at Cushing, the delivery point of WTI futures, rose +3.65 million bbl to a 1-year high. Â On the bullish side, EIA distillate inventories fell -1.9 million bbl, a larger draw than expectations of -200,000 bbl. Â
Today's EIA report showed that (1) U.S. crude oil inventories as of January 13 were +3.0% above the seasonal 5-year average, (2) gasoline inventories were -7.7% below the seasonal 5-year average, and (3) distillate inventories were -19.7% below the 5-year seasonal average. Â U.S. crude oil production in the week ended January 13 was unchanged w/w at 12.2 million bpd, which is only 0.9 million bpd (-6.9%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended January 13 rose by +5 rigs to 623 rigs, modestly below the 2-1/2 year high of 627 rigs posted on December 2. Â U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
More Crude Oil News from Barchart
- Crude Erases Early Gains on U.S. Energy Demand Concerns
- Crude Rallies on Dollar Weakness and Chinese Energy Demand Optimism
- Crude Climbs on Stronger-Than-Expected Chinese Economic News
- Crude Climbs on Stronger-Than-Expected Chinese Economic News
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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