Crude Slightly Lower on a Mixed EIA Inventory Report

April WTI crude oil (CLJ23) this morning is down -0.14 (-0.18%), and Apr RBOB gasoline (RBJ23) is up +0.52 (+0.20%).  April Nymex natural gas (NGJ23) is down -0.017 (-0.62%).

Crude oil and gasoline prices this morning are mixed, with gasoline climbing to a 1-1/2 week high.  A weaker dollar today is supportive of energy prices.  Also, signs of economic strength in China, the world's second-largest crude consumer, is bullish for oil prices.  However, weaker-than-expected U.S. economic news today undercut crude prices.  Today's weekly EIA report was mixed for energy prices.

April nat-gas prices this morning are slightly lower.  A mixed weather outlook is weighing on nat-gas prices.   Forecaster Atmospheric G2 said above-normal temperatures are expected across the southern half of the U.S. and New England from March 6-10, while below-normal temperatures are seen across the West, the Plains, and the Upper Midwest.  

Today's stronger-than-expected Chinese economic news supports energy demand and crude prices.  The China Feb manufacturing PMI rose +2.5 to 52.6, stronger than expectations of 50.6 and the fastest pace of expansion in more than ten years.  Also, the Feb nonmanufacturing PMI rose +1.9 to 56.3, stronger than expectations of 54.9 and the fastest pace of expansion in 2 years.

U.S. economic news today was weaker-than-expected and bearish for crude.  The Feb ISM manufacturing index rose +0.3 to 47.7, weaker than expectations of 48.0.  Also, Jan construction spending unexpectedly fell -0.1% m/m, weaker than expectations of an increase of +0.2% m/m.

Strength in the crude crack spread is supportive of crude prices.  The crack spread today climbed to a 1-month high, which will encourage refiners to boost their purchases of crude and refine it into gasoline and distillates.

Indian buyers of Russian oil are struggling to obtain the crude as onerous demands from financiers wary of breaching Western sanctions are making it hard for Indian buyers to secure financing for their purchases of Russian crude.  The inability to fund the purchases of Russian crude may force Indian buyers elsewhere to obtain crude supplies, which is bullish for oil prices.  

Rising crude demand in India, the world's third-largest crude consumer, is bullish for prices.  India's oil ministry predicts India's oil-products consumption will climb by +4.9% y/y to a record 233.8 MT in the 12 months from April.  

In a bullish factor, Vortexa last Monday reported that the amount of crude stored on tankers that have been stationary for at least a week fell -8.4% w/w to 71.27 million bbl in the week ended February 17.

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.  Saudi Arabian Energy Minister Abdulaziz bin Salman last Thursday said the OPEC+ alliance plans to maintain its oil deal set in October for the rest of this year.  Also, UAE Energy Minister Suhail Al Mazrouei said last Monday that despite Russia's plan to cut crude output, global oil markets remain balanced, and OPEC+ producers don't need to intervene.

Today's weekly EIA inventory report was mixed for energy prices.  On the negative side, EIA distillate stockpiles unexpectedly rose +179,000 bbl to a 1-year high versus expectations of a -500,000 bbl draw.  Also, crude supplies at Cushing, the delivery point of WTI futures, rose +307,000 bbl to a 1-1/2 year high.  On the positive side, EIA crude inventories rose +1.17 million bbl, below expectations of a +1.9 million bbl build.

Today's EIA report showed that (1) U.S. crude oil inventories as of February 24 were +9.7% above the seasonal 5-year average, (2) gasoline inventories were -5.6% below the seasonal 5-year average, and (3) distillate inventories were -11.1% below the 5-year seasonal average.  U.S. crude oil production in the week ended February 24 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 24 fell by -7 rigs to 600 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.

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