Gasoline, Distillate Stockpiles Up Despite Unusually Warm Winter
The Energy Information Administration (EIA) has reported a buildup in gasoline and distillate inventories in its Weekly Petroleum Status Report for the week ended February 1. Despite the warm winter weather, which should have theoretically resulted in higher gasoline demand, the rise in stockpiles raises questions about demand for the automotive fuel. Similarly, the increase in distillates is bucking trends as stronger demand for heating oil would be expected during this time of the year.
Oil Prices Rise Despite Unexpected Buildup in Stockpiles
Despite the surprising buildup in gasoline and distillate inventories, oil prices rose more than 1% on Wednesday. Traders who were long on the trade attempted to remain focused on the impending demand from China, the largest crude oil importer in the world, as the country has recently lifted COVID-related restrictions. This development is expected to lead to increased energy usage.
Azeri Crude Oil Export Terminal Temporarily Halted
Operations at the 1 million barrel-per-day export terminal, which provides Azeri crude oil to international markets, were temporarily halted on Monday and were scheduled to remain shut until the end of Wednesday.
Federal Reserve’s Stance on Interest Rates Impacting Oil Prices
The oil market has been attempting to find stability after Federal Reserve Chair Jerome Powell stated that the Fed wished to give disinflation a chance to work instead of resorting to higher interest rates. The dollar received a morale boost on Wednesday when New York Fed President John Williams said that U.S. interest rates need to stay high for “a few years” to bring inflation down meaningfully.
Crude Oil Prices Rise Despite Inventory Buildup
New York-traded West Texas Intermediate (WTI) crude settled up $1.33, or 1.7%, at $78.47 per barrel. Brent crude, traded in London, settled up $1.40, or 1.7%, at $85.09. Despite the surprising inventory buildup, crude oil prices have risen over the past two sessions, recovering from a 7.5% dip last week.
Decline in Chinese Crude Imports
A recent Reuters report showed a decline in Chinese crude imports, assessed at 10.98 million barrels per day (bpd) in January, down from December’s 11.37 million bpd and November’s 11.42 million bpd. Part of the decline was likely due to the week-long Lunar New Year holiday. Analysts at ANZ noted a sharp increase in traffic in China’s 15 largest cities following the holiday, but also acknowledged that Chinese oil traders were relatively absent from the market.
U.S. Crude Oil Stockpiles Reach 20-Month Highs
The EIA has reported that U.S. crude oil stockpiles have risen seven weeks in a row to reach 20-month highs. The buildup was attributed to plant outages and weaker demand for fuels, resulting in lower-than-usual refining activity at this time of the year. The crude output increased by 100,000 barrels per day (bpd) to reach 12.3 million bpd. Crude exports, on the other hand, declined 17% on the week, to 2.9 million bpd from 3.492 million bpd the prior week.