Mar WTI crude oil (CLH23) this morning is down -1.58 (-2.00%), and Mar RBOB gasoline (RBH23) is down -4.30 (-1.73%). March Nymex natural gas (NGH23) is down -0.014 (-0.55%).
Crude oil and gasoline prices this morning are moderately lower. A rally in the dollar index (DXY00) to a 1-1/4 month high today is bearish for energy prices. Crude prices extended their losses after today's weekly EIA report showed U.S. crude inventories surged to a 20-month high.
Mar nat-gas prices this morning are moderately lower as above-normal U.S winter temperatures curb heating demand for nat-gas. The Commodity Weather Group said above-normal temperatures are expected across the eastern and southern U.S. states through February 24. BNEF said lower-48 state nat-gas demand today is expected at 79.2 bcf, down -18% y/y.
A supportive factor for crude was Monday'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. 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 would not boost output to make up for the shortfall. However, the Russian announcement had a limited bullish impact since Russia needed to cut production anyway to account for sanctions and reduced demand for Russian oil.
In a bullish factor, Vortexa on Monday 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.
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 at about 2 million bpd, in the second half of this year when accelerating demand will tighten the market. OPEC crude production in January fell by -60,000 bpd to 29.12 million bpd.
Today's weekly EIA inventory report was mainly bearish for crude prices. EIA crude inventories rose +16.28 million bbl to a 20-month high, well above expectations of a +2.0 million bbl increase. Also, gasoline stockpiles rose +2.3 million bbl to an 11-month high, more than expectations for a +1.5 million bbl build. In addition, crude supplies at Cushing, the delivery point for WTI futures, rose +659,000 bbl to a 19-1/2 month high. On the positive side, EIA distillate inventories unexpectedly fell -1.29 million bbl versus expectations of a +1.0 million bbl build.
Today's EIA report showed that (1) U.S. crude oil inventories as of February 10 were +7.3% above the seasonal 5-year average, (2) gasoline inventories were -4.9% below the seasonal 5-year average, and (3) distillate inventories were -15.3% below the 5-year seasonal average. U.S. crude oil production in the week ended February 10 was unchanged w/w at 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.
More Natural Gas News from Barchart
- Nat-Gas Prices Soar as Partial Reopening of Freeport Terminal Boosts U.S. Gas Exports
- Crude Tumbles as U.S. Plans to Release Crude from Stategic Petroleum Reserve
- Nat-Gas Retreats on Warm Temps and No Firm Timeline for Freeport Reopening
- Ample U.S. Crude Inventories Weigh on Prices
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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