Recent data from the US government has revealed that commercial crude stockpiles have experienced a modest increase, rising less than anticipated last week. The Energy Information Administration reported that inventories of crude oil, excluding the strategic petroleum reserve, increased by 800,000 barrels, reaching a total of 419.1 million barrels for the week ending last Friday.
Market expectations, as indicated by a Bloomberg poll, had anticipated a greater rise of 1.1 million barrels. This latest inventory level is approximately 4% lower than the five-year average for this time of year, revealing tighter market conditions despite the recent uptick. In tandem with crude oil, inventories of distillate fuel and total motor gasoline stocks also saw significant increases.
Each category recorded a rise of 2.3 million barrels over the previous week. Additionally, propane and propylene inventories added 1.1 million barrels, contributing to a total increase in commercial petroleum inventories of 9 million barrels last week, according to the latest EIA data. Refinery operations have also shown slight changes, with crude-oil refinery inputs averaging 16.8 million barrels per day—down 141,000 barrels from the previous week.
As a result, refinery utilization decreased to 92.8% of capacity, compared to 93.3% from the prior week. Meanwhile, the production of distillate fuel has hovered at 5.2 million barrels per day, marking little week-to-week variation. However, gasoline production experienced a decline, falling to 9.4 million barrels per day from 9.7 million barrels the week before. On the pricing front, West Texas Intermediate (WTI) crude oil saw a boost of 2.2%, reaching $67.19 a barrel by late Wednesday afternoon.
In contrast, Brent crude rose by 2% to $70.54. Notably, Brent had dipped below the $70 mark on Tuesday for the first time in over two years, while WTI hit a low previously seen in December 2021, as reported by Saxo Bank in their Wednesday analysis. According to Ole Hansen, Head of Commodity Strategy at Saxo, the future trajectory of crude oil prices will be influenced by numerous factors, particularly next week’s Federal Open Market Committee meeting and the dollar's expected response to anticipated rate cuts.
Hansen remarked that unless Brent crude regains momentum and breaches $75, and WTI moves above $71.50, a significant round of short-covering is unlikely to occur. Adding to this narrative, the Organization of the Petroleum Exporting Countries (OPEC) has proactively adjusted its global oil demand projections for 2024 and 2025, indicating a cautious outlook for the market going forward.
This adjustment comes at a time when the oil market seeks clarity and direction amidst evolving economic conditions and potential shifts in monetary policy..