Crude Gains on Signs of Stronger Global Energy Demand

Mar WTI crude oil (CLH23) this morning is up +0.88 (+1.13%), and Mar RBOB gasoline (RBH23) is up +3.37 (+1.34%).  March Nymex natural gas (NGH23) is up +0.005 (+0.19%).

Crude oil and gasoline prices this morning recovered from early losses and are moderately higher.  Crude rebounded from a 3-week low as the dollar (DXY00) weakened.  Also, signs of more robust global energy demand are bullish for crude prices after the IMF today boosted its 2023 global GDP forecast.  However, a bearish factor for crude is concern that the actions by global central banks this week to raise interest rates will slow economic growth and energy demand.

Mar nat-gas today is slightly higher as it consolidates above Monday's 1-3/4 year nearest-futures low.  Nt-gas prices are under pressure as abnormally mild winter weather is weakening heating demand for nat-gas and is keeping gas inventories above historical norms.  The Commodity Weather Group said temperatures are expected to climb above normal across most of the central and eastern U.S. next week.

Crude prices garnered support today after the International Monetary Fund (IMF) revised its 2023 GDP estimate up by +0.2 to 2.8% from a 2.7% estimate in October, citing resilient U.S. consumer spending and China's reopening.

An unexpected expansion in the Eurozone economy last quarter shows stronger energy demand and is bullish for crude prices.  Today's news showed Eurozone Q4 GDP rose +0.1% q/q and +1.9%y/y, stronger than expectations of -0.1% q/q and +1.7% y/y.

Signs of strength in Chinese fuel demand support crude prices after Sinopec reported that retail gasoline sales at gas stations affiliated with Sinopec in China rose +20% over the Lunar New Year break compared to the same period last year.  Also, China's Ministry of Culture and Tourism reported that more than 300 million trips were made during the week-long Lunar New Year holiday, nearly 90% of pre-pandemic levels.

Delegates from OPEC+ said the group would maintain its crude production targets at current levels when they meet on February 1, as they await clarity on the recovery in consumption in China and the impact of sanctions on Russian crude supplies.  Goldman Sachs predicts that OPEC+ will only start to reverse its supply cuts, currently about 2 million bpd, in the second half of this year when accelerating demand will tighten the market.

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 -16% w/w to 75.20 million bbl in the week ended January 27.

Increased OPEC crude output is bearish for oil prices.  OPEC Dec crude production rose +150,000 bpd to 29.140 million bpd.  OPEC+ on December 4 decided to keep the group's crude production targets unchanged for January, in line with expectations.  OPEC+ will meet again on February 1 to discuss its production targets.

Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of January 20 were +2.5% above the seasonal 5-year average, (2) gasoline inventories were -7.7% below the seasonal 5-year average, and (3) distillate inventories were -19.6% below the 5-year seasonal average.  U.S. crude oil production in the week ended January 20 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 27 fell by -4 rigs to 609 rigs, modestly below the 2-1/2 year high of 627 rigs posted on December 2.  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.

• Crude Oil Falls on a Stronger Dollar and Energy Demand Concerns
• Nat-Gas Prices Plummet as Warm Winter Weather Boosts Supplies
• Crude Tumbles on Dollar Strength and Energy Demand Concerns
• Crude Retreats on Dollar Strength and Technical Selling