Price Moves
- West Texas Intermediate (WTI) crude for March delivery rose 90 cents to $75.99 a barrel.
- March Brent crude, the global benchmark, was up 80 cents at $80.43 a barrel on ICE Futures Europe.
Market Drivers
Oil futures saw an upswing in response to significant drops in U.S. crude inventories and production. The Energy Information Administration reported a larger-than-expected drop in U.S. crude inventories of 9.2 million barrels in the week ended Jan. 19. Additionally, U.S. crude output decreased by 1 million barrels a day to 12.3 million barrels a day, pulling back from record output the previous week.
According to analysts at Sevens Report Research, the most noteworthy part of the weekly data was the drop in production. However, they also pointed out that a decrease in refinery utilization should have resulted in a significant drop in refined products, unless there were other factors at play in the physical markets.
On the other hand, gasoline inventories rose by 4.9 million barrels, while gasoline supplied, a measure of demand, dropped to a one-year low of 7.88 million barrels a day, significantly lower than the peak of 9.5 million barrels a day in fall 2023.
The analysts concluded that adverse winter weather had the most impact on the oil and refined product markets since the Great Texas Freeze in February 2021.
Key Factors to Watch
According to the analysts, there are two key factors that traders need to pay attention to:
- The speed at which oil production recovers. A faster recovery would have a bearish effect on prices.
- Whether consumer demand for refined products returns to normal seasonal levels. An earlier recovery would have a bullish effect on prices.
Leave a Reply