Oil futures climbed Wednesday, but settled off the session’s highs after official U.S. data revealed a weekly climb of more than 5 million barrels in domestic crude inventories, declines in gasoline and distillate stockpiles, and a rise back to record U.S. oil production.
Developments tied to a potential cease-fire between Israel and Hamas have also helped ease concerns over risks to oil supplies in the Middle East, limiting gains for oil prices, analysts said.
Price moves
-
West Texas Intermediate crude for March delivery
CL00,
+0.58% CL.1,
+0.58% CLH24,
+0.58%
edge up by 55 cents, or nearly 0.8%, to settle at $73.86 a barrel on the New York Mercantile Exchange, after touching an intraday high at $74.22. -
April Brent crude
BRN00,
+0.38% BRNJ24,
+0.38% ,
the global benchmark, added 62 cents, or 0.8%, at $79.21 a barrel on ICE Futures Europe. -
March gasoline
RBH24,
-0.41%
rose 2.1% to $2.26 a gallon, while March heating oil
HOH24,
+2.13%
climbed 2.6% to $2.82 a gallon. -
Natural gas for March delivery
NGH24,
-4.12%
ended at $1.97 per million British thermal units, down 2.2% for the lowest front-month contract finish since Sept. 22, 2020, according to Dow Jones Market Data.
Supply data
It appears that the increase in crude supplies was caused mainly due to a “big drop in refining in the Midwest,” said Phil Flynn, senior market analyst at The Price Futures Group. That was more than likely impacted by the power outage and subsequent shutdown at BP’s
BP,
oil refinery in Whiting, Ind., last week, he said.
The Energy Information Administration on Wednesday reported that U.S. commercial-crude inventories rose by 5.5 million barrels for the week ended Feb. 2.
On average, analysts surveyed by S&P Global Commodity Insights forecast a weekly climb of 600,000 barrels. Late Tuesday, the American Petroleum Institute said U.S. crude inventories rose 674,000 barrels last week, according to a source citing the data.
The EIA report also revealed weekly supply declines of 3.1 million barrels for gasoline and 3.2 million barrels for distillates. The S&P Global Commodity Insights analyst survey showed forecasts for an inventory gain of 300,000 barrels for gasoline and a decline of 2.4 million barrels for distillates.
“Refinery run data continue to confirm a combination of unplanned disruptions and planned maintenance starting well earlier than last year,” said Troy Vincent, senior market analyst at DTN.
U.S. crude-refinery inputs averaged 14.8 million barrels per day last week, which was 570,000 barrels per day less than a year ago, EIA data showed.
The draws to product stocks are supporting crack spreads — the price difference between crude-oil and petroleum products — which “indicate higher fuel prices and stronger crude demand in the coming weeks once maintenance is completed,” said Vincent.
U.S. oil production climbed by 300,000 barrels and back to a record 13.3 million barrels a day last week, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub were unchanged last week at 28.1 million barrels.
Market drivers
The “real reason” why oil’s not moving much higher is that there’s speculation about the potential for more talks on an Israel-Hamas peace deal, said Flynn.
Oil prices have remained largely rangebound, failing to build a significant risk premium despite a conflict in the Middle East that has escalated beyond the Israel-Hamas war.
Market participants “appear to be assuming that we will not see a significant escalation in the Middle East, at least an escalation which puts oil supply at risk,” Warren Patterson and Ewa Manthey, commodity strategists at ING, said in a note.
“It’s important to remember that while we are seeing disruptions to trade flows as a result of Red Sea developments, oil production remains unchanged as a result. Furthermore, the oil balance is comfortable through [the first half of 2024], while OPEC is sitting on a little more than 5 million barrels a day of spare capacity, of which more than 3 million barrels a day sits in Saudi Arabia,” they wrote.
Meanwhile, a monthly report from the Energy Information Administration on Tuesday forecast U.S. crude-oil output to will grow by around 170,000 barrels a day in 2024 to average 13.1 million barrels a day (mbd). This is 0.8% lower than the 13.21 mbd the EIA was forecasting last month.
Natural-gas futures, meanwhile, settled at their lowest level in more than three years on Wednesday, pressured as mild weather conditions are forecast for most of the eastern half of the U.S. over the next week, said Robbie Fraser, manager of global research and analytics at Schneider Electric.
Read: U.S. natural-gas consumption hit a record in January. So why are prices falling?
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