March WTI crude oil (CLH25) Thursday closed up +0.32 (+0.44%), and March RBOB gasoline (RBH25) closed unchanged.
Crude oil prices Thursday climbed to a 1-week high and settled moderately higher. Thursday's weaker dollar was supportive of energy prices. Crude also has carryover support from this week's drone attack on a Russian pumping station that could reduce Kazakhstan crude oil exports by 30%. In addition, crude has support from Wednesday when Bloomberg reported that OPEC+ is considering a delay of monthly supply increases that are currently due to start in April. Crude prices fell back from their best levels Thursday on a mixed weekly EIA inventory report.
Oil prices also saw support from reports that the G7 is considering tightening the price cap on Russian oil exports, with a view towards further reducing Russian oil exports and revenue and increasing the pressure on Russia to negotiate an end to the Russian-Ukraine war.
On the bearish side, oil prices continue to be undercut by the thaw in US-Russian relations and possible peace talks on the Russia-Ukraine war, which could eventually lead to reduced sanctions on Russia and the full resumption of Russian oil exports.
Crude oil prices have support from expectations for tighter US sanctions on Iranian oil exports after US Treasury Secretary Bessent said last week the US aims to cut Iranian oil exports by more than 90%. The US Treasury, in early February, sanctioned an international network facilitating the shipment of Iranian crude oil to China.
Crude found support when Politico reported last Monday that EU countries may begin seizures of Russia's illegal shadow fleet of oil-exporting tankers in the Baltic Sea using international law to grab vessels on environmental and piracy grounds. Meanwhile, the US on January 10 imposed new sanctions on Russia's oil industry that could curb global oil supplies. The measures targeted Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude in the first 10 months of 2024, accounting for about 30% of its tanker flow, according to Bloomberg data. The US also targeted insurers and traders linked to hundreds of tanker cargoes. Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -130,000 bpd to 3.09 million bpd in the week to February 2. Russian oil production fell to 8.062 million bpd in January, which was -16,000 bpd below its OPEC+ quota.
Crude oil demand in China has weakened and is a bearish factor for oil prices. According to Chinese customs data, China's 2024 crude imports fell -1.9% y/y to 553 MMT. China is the world's biggest crude importer.
A weekly rise in crude oil held worldwide on tankers is bearish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days rose by +1.4% w/w to 73.77 million bbl in the week ended February 14.
OPEC+ said at its monthly meeting on February 3 that it would not change its oil-production plans in the first quarter but would gradually restore crude output in monthly stages beginning in April. OPEC+ last month pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. OPEC+ had previously planned to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, the date for the production increase to be completed was pushed back until September 2026. OPEC Jan crude production fell -700,000 bpd to 27.03 million bpd.
Thursday's weekly EIA report was mixed for crude and products. On the bullish side, EIA distillate stockpiles fell -2.05 million bbl, a bigger draw than expectations of -1.5 million bbl. On the bearish side, EIA crude inventories rose +4.63 million bbl, a larger build than expectations of +3.0 million bbl. Also, EIA gasoline supplies fell -151,000 bbl, a smaller draw than expectations of -1.0 million bbl. In addition, crude supplies at Cushing, the delivery point of WTI futures, rose +1.47 million bbl.
Thursday's EIA report showed that (1) US crude oil inventories as of February 14 were -3.6% below the seasonal 5-year average, (2) gasoline inventories were -0.8% below the seasonal 5-year average, and (3) distillate inventories were -11.9% below the 5-year seasonal average. US crude oil production in the week ending February 14 was unchanged w/w at 13.497 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6.
Baker Hughes reported last Friday that active US oil rigs in the week ending February 14 rose by +1 to 481 rigs, modestly above the 3-year low of 472 rigs posted January 24. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.
