Crude Oil Prices Rebound as EIA Inventories Show Unexpected Decline

Crude oil prices are experiencing mixed movements today, with gasoline dropping to a two-month low. Economic concerns are weighing heavily on crude prices following the larger-than-expected decline in US January new home sales. Additionally, the US February consumer confidence index hit an eight-month low, further dampening sentiment.

The strength of the dollar is also exerting downward pressure on energy prices. Nevertheless, crude prices managed to recover from a 2-1/4 month low and slightly increased after the latest EIA report revealed an unexpected drop in weekly crude inventories.

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Global economic news today was weaker than anticipated, negatively impacting energy demand and crude prices. US January new home sales fell by 10.5% month-over-month to 657,000, missing the expected 680,000. In Germany, the March GfK consumer confidence index unexpectedly dropped by 2.1 points to an 11-month low of -24.7, contrary to expectations of a rise to -21.6.

Earlier this week, oil prices were pressured by Iraq’s oil minister’s comments about the potential resumption of Kurdistan oil pipeline exports, pending Turkey’s approval. Despite this, Iraq plans to stay within its OPEC production cap. These pipeline shipments, approximately 185,000 bpd, have been halted for the past two years due to a payment dispute.

US-Russian relations are also impacting oil prices, with potential peace talks over the Russia-Ukraine conflict possibly leading to reduced sanctions and the resumption of Russian oil exports.

Support for crude prices came from last week’s drone attack on a Russian pumping station, potentially cutting Kazakhstan’s crude oil exports by 30%. Additionally, Bloomberg reported that OPEC+ might delay its monthly supply increases planned to start in April, providing further support for prices.

On January 10, the US imposed new sanctions on Russia’s oil industry, targeting companies like Gazprom Neft and Surgutneftgas. These measures could reduce global oil supplies, as these companies exported about 970,000 bpd of Russian crude in the first ten months of 2024, representing around 30% of its tanker flow. The sanctions also targeted insurers and traders linked to hundreds of tanker cargoes.

Bloomberg’s vessel-tracking data showed a decrease in Russian crude exports by 130,000 bpd to 3.09 million bpd in the week ending February 2. Additionally, Russian oil production fell to 8.062 million bpd in January, 16,000 bpd below its OPEC+ quota.

A reduction in crude oil held on tankers worldwide is seen as bullish for oil prices. Vortexa reported that stationary crude oil stored on tankers for at least seven days fell by 12% week-over-week to 65.65 million barrels for the week ending February 21.

At its monthly meeting on February 3, OPEC+ announced it would maintain its oil production plans for Q1 but would gradually restore crude output in monthly stages starting in April. OPEC+ had previously postponed a planned production hike of 180,000 bpd from January to April, indicating a slower pace of unwinding output cuts. The full restoration of 2.2 million bpd of output has now been pushed back to September 2026. In January, OPEC’s crude production fell by 700,000 bpd to 27.03 million bpd.

The latest EIA report showed mixed results for crude and products. On the positive side, EIA crude inventories unexpectedly fell by 2.3 million barrels, against expectations of a 2.4 million barrel build. However, EIA gasoline supplies rose by 369,000 barrels, contrary to expectations of a 1.4 million barrel draw. EIA distillate stockpiles also increased by 3.91 million barrels, defying expectations of a 2.76 million barrel draw. Additionally, crude inventories at Cushing, the delivery point for WTI futures, increased by 1.28 million barrels.

Key points from the EIA report include:
1. US crude oil inventories as of February 21 were 4.3% below the seasonal 5-year average.
2. Gasoline inventories were 0.1% below the seasonal 5-year average.
3. Distillate inventories were 7.8% below the 5-year seasonal average.

US crude oil production remained unchanged for the week ending February 21 at 13.502 million bpd, slightly below the record high of 13.631 million bpd from December 6.