The EIA Reports Tight Crude Oil Market: Prices Firm on Positive Inventory Data and Middle East Tensions

Energy – The EIA reports a tight crude oil market

• Crude oil prices recovered yesterday and have been trading on a  firmer note this Thursday on a constructive report from the EIA on US crude oil inventory. The ongoing tensions in the Middle East, combined with positive economic data, further helped oil prices to trade higher. ICE Brent has been trading comfortably above US$80/bbl today, while NYMEX WTI also inched up to US$75.5/bbl. Brent-WTI spread has narrowed to US$4.9/bbl currently compared to a high of around US$5.8/bbl last week as the cold wave in the US tightens supplies in the US market.
• The weekly report from the Energy Information Administration shows that the US crude oil inventory dropped by a huge 9.2MMbbls over the last week. The withdrawals are significantly higher than the 6.7MMbbls of withdrawal that API reported or the market expectations of around 0.9MMbbls/d of withdrawal. Crude oil inventory at Cushing, Oklahoma, dropped by around 2MMbbls over the week. Crude oil imports into the country dropped by around 1.8MMbbls/d over the week, which helped to tighten the supplies.
• Refinery operating rates in the country dropped sharply by 7.1% over the week to 85.5% as of 19 January as the cold snap pushed a large part of the refining capacity to close temporarily. Gasoline inventory increased by around 4.9MMbbls over the last week, while distillate inventory was down 1.4MMbbls. The market expected inventory build-up of gasoline and distillate at around 1.4MMbbls and 0.6MMbbls, respectively.
• European gas prices increased yesterday as Qatar delayed some of the LNG deliveries into the region due to ongoing conflict around the Red Sea trade route. The longer route around the Cape of Good Hope adds around ten days of transport time for the LNG cargoes, which has pushed up gas prices in the immediate term. That said, total LNG supplies remain largely unaffected for now, and exports from Qatar remain at a healthy pace.