Ample U.S. Crude Inventories Weigh on Prices

Mar WTI crude oil (CLH23) this morning is down -0.43 (-0.54%), and Mar RBOB gasoline (RBH23) is up +0.44 (+0.18%).  March Nymex natural gas (NGH23) is down -0.050 (-1.99%).

Crude oil and gasoline prices this morning are mixed, with gasoline climbing to a 1-1/2 week high.  A weaker dollar today is bullish for energy prices and strength in stocks, which shows confidence in the economic outlook supporting energy demand.  Crude prices are under pressure on plentiful U.S. crude supplies after last Wednesday's weekly EIA report showed U.S. crude inventories rose to a 1-1/2 year high.  

Mar nat-gas this morning is moderately lower as spring-like temperatures across the U.S. curbs heating demand for nat-gas.  Forecaster Atmospheric G2 said "early spring-like" weather is seen across a large portion of the central and eastern U.S. through February 22.  Nat-gas prices are also weighed down from negative carry-over to a decline in European nat-gas prices today to a 17-month low.  

A supportive factor for crude was today's comments from UAE Energy Minister Suhail Al Mazrouei, who said that despite Russia's plan to cut crude output, global oil markets remain balanced and OPEC+ producers don't need to intervene, signaling OPEC+ won't boost its crude production levels.

Crude prices garnered support today from the action by the European Union Commission to raise its Eurozone 2023 GDP forecast to 0.9% from a prior estimate of 0.3%.

In a bullish factor, Vortexa today reported that the amount of crude stored on tankers that have been stationary for at least a week fell -9.5% w/w to 72.85 million bbl in the week ended February 10.

Last Friday, Russia said it plans to cut its oil production in March by 500,000 bpd in retaliation for international sanctions.  OPEC+ said they wouldn’t boost output to make up for the shortfall.  However, gains in crude are limited by speculation that a lack of demand for Russian crude is prompting Russia to portray these output losses as a decision to cut their crude production when the output cuts might have occurred regardless.

Crude prices have carry-over support from last Monday when Saudi Aramco unexpectedly increased the price of its Arab Light grade crude shipped to Asian customers in March by 20 cents a barrel versus an expected cut of 20 cents.  That was the first price increase for that crude grade since September.

According to Goldman Sachs, oil demand in China is picking up as the economy reopens, a bullish factor for crude.  Goldman reports that oil demand in China in mid-January rose to 15.5 million bpd from 14.5 million bpd in late November.  Goldman predicts that Chinese consumption of crude will climb by +1.0 million bpd in Q4 of 2023.

On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia.  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.  OPEC Jan crude production fell -60,000 bpd to 29.12 million bpd.

Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of February 3 were +4.0% above the seasonal 5-year average, (2) gasoline inventories were -5.3% below the seasonal 5-year average, and (3) distillate inventories were -15.0% below the 5-year seasonal average.  U.S. crude oil production in the week ended February 3 rose +0.8% w/w to a 2-3/4 year high of 12.3 million bpd, which is only 0.8 million bpd (-6.1%) 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 February 10 rose by +10 rigs to 609 rigs, moderately 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 Closes Moderately Higher after Russia Cuts Oil Output
• Crude Prices Climb after Russia Cuts Production
• Crude Prices Fall Back on Rising U.S. Inventories and Energy Demand Concerns
• Crude Oil Prices Drop on Rising U.S. Inventories and Energy Demand Concerns