Myra P. Saefong and William Watts, MarketWatch

SAN FRANCISCO/NEW YORK
EnergiesNet.com 02 08 2023

Oil futures marked a third straight gain on Wednesday, buoyed by gets for higher energy demand, even as U.S. government data showed a seventh straight weekly rise in crude inventories.

Price action

• West Texas Intermediate crude for March delivery CL.1, 0.33% CL00, 0.33% CLH23, 0.33% rose $1.33, or 1.7%, to settle at $78.47 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since Jan. 31, according to Dow Jones Market Data.
  
  
• April Brent crude BRN00, 0.35% BRNJ23, 0.35% added $1.40, or 1.7%, at $85.09 a barrel on ICE Futures Europe, the highest since Jan. 27.
  
  
• March gasoline RBH23, 0.26% edged up by 0.2% to $2.4628 a gallon.
  
  
• March heating oil HOH23, 0.71% shed 0.4% to $2.8933 a gallon.
  
  
• March natural gas NGH23, -0.63% settled at $2.396 per million British thermal units, down 7.3%, after tacking on 3.3% on Tuesday.

Supply data

The Energy Information Administration on Wednesday reported across the board gains for domestic crude oil and production stockpiles.

The data, however, also showed “some evidence of improving consumer demand for refined products,” said Tyler Richey, co-editor of Sevens Report Research, with the four-week moving average of gasoline supplied up from the previous week’s figure by just over 200,000 barrels a day to 8.3 million barrels a day.

The U.S. refinery utilization rate, meanwhile, saw a 2.2% jump which suggests refinery operators are “anticipating an uptick in consumer demand,” he told MarketWatch.

U.S. crude inventories rose by 2.4 million barrels for the week ended Feb. 3, the EIA said. That followed six consecutive weeks of gains reported by the government agency.

On average, analysts forecasted a climb of 2.1 million barrels for crude supplies, according to a poll conducted by S&P Global Commodity Insights. The American Petroleum Institute, an industry trade group, late Tuesday reported a 2.2 million barrel fall, Dow Jones Newswires reported.

The EIA report also showed weekly inventory gains of 5 million barrels for gasoline and 2.9 million barrels for distillates. The S&P Global Commodity Insights survey had forecast inventory increases of 1.6 million barrels for gasoline and 100,000 barrels for distillates.

Crude stocks at the Cushing, Okla., Nymex delivery hub climbed by 1.1 million barrels for the week, the EIA said, while total domestic petroleum production edged up by 100,000 barrels to 12.3 million barrels a day.

“A dip in crude exports and ongoing robust crude imports have combined to offset a decent jump in refining activity to result in a modest build of 2.4 million barrels” for crude inventories, said Matt Smith, lead oil analyst, Americas, at Kpler, in a market update. “The build was further aided by production being increased to 12.3 million barrels per day — the highest weekly estimate since the start of the pandemic (April 2020). 

Other market drivers

Overall, “an improving outlook for the health of the U.S. economy in the wake of the January jobs report, and ongoing optimism about the positive demand impact of China’s rapid reopening process are offering support to global oil markets right now,” said the Sevens Report’s Richey.

Traders are “clinging to hopes that consumer demand will rebound during a possible soft landing” for the economy, but “there is still significant downside risk for oil prices” this year, with the potential for oil to hit $60 in the first half of 2023 “if growth begins to meaningfully roll over.”

Oil prices had settled higher Tuesday after Federal Reserve Chairman Jerome Powell didn’t push back as forcefully as feared on market expectations the central bank will slow its interest rate increases.

Powell said he expected to see a significant fall in inflation this year but also warned that a surprisingly strong labor market means bringing down inflation will take longer and require rates to move higher than investors had previously anticipated.

Macro investors “pivoted from selling oil contracts as an expression of the deflationary theme to pricing in a reflationary impulse as the U.S. economy is shedding recessionary concerns after Chair Powell did not signal a higher terminal rate was on the cards at this time,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

Oil prices also found support this week after news that a major earthquake on Monday temporarily shut Turkey’s Ceyhan oil terminal. Crude flows to the Mediterranean export terminal resumed late on Tuesday, according to Bloomberg.

marketwatch.com 02 08 2023