Crude Sharply Higher as a Black Sea Terminal Shuts and EIA Inventories Shrink

May WTI crude oil (CLK22) on Wednesday closed up +5.66 (+5.18%), and May RBOB gasoline (RBK22) closed up +11.49 (+3.48%).  

WTI crude oil and RBOB gasoline prices Wednesday rallied sharply and posted 2-week highs.  Crude prices jumped Wednesday morning after a major Black Sea crude export terminal shut down due to storm damage, compounding global supply risks.  Crude and gasoline prices raced to their highs late Wednesday morning after weekly EIA data showed U.S. crude supplies and products fell more than expected last week.

Crude prices surged Wednesday morning after the Caspian Pipeline Consortium, a major Black Sea oil export terminal, halted loadings and faces weeks of disruptions after storms damaged the terminal.  Russian Deputy Prime Minister Novak said the repairs could take up to two months.  Crude exports could be curtailed by -1 million bpd, further tightening European energy supplies.  

Trafigura on Wednesday said that the increasingly tight balance of supply and demand would mean that oil prices are going to keep going up and projected prices to climb to $150 a barrel by summer.

Saudi Arabia warned Monday that it couldn't be held responsible for any drop in its crude output if it doesn't get more help deterring attacks from Houthi rebels.  Over the weekend, Houthi rebels attacked at least six Saudi crude production sites with drones and missiles.

In its monthly report last Friday, the International Energy Agency (IEA) said that global oil markets are in an "emergency situation" that could get worse in the next few months as the potential loss of Russian oil exports "cannot be understated."

Fuel demand in China has slumped as lockdown restrictions in major cities have led to a plunge in mobility levels.  More than 50% of flights were canceled at China's 20-largest airports from March 11-17.  A resurgence of Covid infections in China has prompted the government to put 45 million people under pandemic lockdowns.

On March 7, crude prices soared to a 13-1/2 year high, and gasoline surged to an all-time nearest-futures high on concern about global oil supplies.  The U.S. last Tuesday announced a ban on the imports of Russian energy, including crude oil, liquified natural gas, and coal.  The UK said Tuesday it would phase out all imports of Russian crude by the end of 2022.  However, it will still allow for imports of Russian natural gas.

An increase in global crude oil stored on oil tankers worldwide is bearish for crude prices.  Vortexa said Monday that crude oil stored on tankers that have been stationary for at least seven days in the week ended March 18 rose +1,6% w/w to 93.17 million bbl.

Wednesday's weekly EIA report was bullish for crude and its products.  EIA crude inventories fell -2.51 million bbl, a bigger draw than expectations of -750,000 bbl.  Also, gasoline stockpiles fell -2.95 million bbl, a bigger draw than expectations of -1.85 million bbl.  In addition, distillate supplies dropped -2.07 million bbl to a nearly 8-year low, a bigger draw than expectations of -1.05 million bbl.  A slightly bearish factor for crude was the +1.235 million bbl increase in crude supplies at Cushing, the delivery point for WTI futures.

Wednesday's weekly EIA report showed that (1) U.S. crude oil inventories as of March 18 were -12.3% below the seasonal 5-year average, (2) gasoline inventories were -0.9% below the 5-year average, and (3) distillate inventories were -17.7% below the 5-year average.  U.S. crude oil production in the week ended March 18 was unchanged at 11.6 million bpd, which is -1.5 million bpd (-11.5%) 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 March 18 fell by -3 rigs to 524, falling back from a 1-3/4 year high of 527 rigs the prior week.  U.S. active oil rigs have risen sharply from the 16-1/2 year low of 172 rigs from Aug-2020, signaling an increase in U.S. crude oil production capacity.