Recap: The crude oil market posted an inside trading day and traded higher following six consecutive sessions of losses. The market, which traded over $2 lower on Wednesday on expectations of further increases in interest rates, bounced off its lows and retraced some of its previous losses on the news that Russia plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced production cuts of 500,000 bpd. The crude market posted a low of $73.83 in overnight trading as it failed to test it previous low of $73.80 and gradually traded higher to $75.96 ahead of the release of the EIA petroleum stocks reports. However, the market retraced some of its gains and traded in a sideways pattern following the release of the EIA report, which showed a larger than expected build in crude stocks once again and an unexpected build in distillate stocks. The market later traded to a high of $75.99 in afternoon trading before it once again settled in sideways trading range ahead of the close. The April WTI contract settled up $1.44 at $75.39 and the April Brent contract settled up $1.61 at $82.21. Meanwhile, the product markets ended mixed, with the heating oil market settling down 67 points at $2.7081 and the RB market settling up 4.19 cents at $2.3795.
Technical Analysis: The oil market on Friday will likely remain supported as the markets turns its focus back on the news regarding the Russian output cut in March. The market is seen holding support at $75.05, its lows of $73.83 and $73.80 and $73.08, basis a trendline. More distant support is seen at $72.64 and $72.25. Meanwhile, resistance is seen at its highs of $75.96, $76.55, $77.38, basis a trendline, $77.51 and $78.25.
Fundamental News: The EIA reported that U.S. crude oil inventories increased for the ninth consecutive week and to the highest level since May 2021 as refinery activity continued to slow down. Crude oil inventories increased by 7.6 million barrels to 479 million barrels in the week ending February 17th. Crude oil stocks held in Cushing, Oklahoma increased by 700,000 barrels to 40.4 million barrels, the highest level since June 2021. Gulf Coast crude stocks increased by 4.8 million barrels on the week to 267.9 million barrels, the highest level since May 2021. The EIA also reported that distillate stocks increased by 2.698 million barrels on the week to 121.9 million barrels, the highest level since January 2022. Refinery utilization fell by 0.6% to 85.9%.
UBS cut its oil price forecasts amid a period of range bound trading but continues to view that disruptions to Russian supplies and increasing demand in China should increase prices back towards $100/barrel later this year. UBS cut its June forecast by $10/barrel to $100/barrel and its September and December forecasts by $5 to $105/barrel. UBS expects demand to increase by 1.6 million bpd this year, half of which will come from China.
The Chief Executive Officer of Pioneer Natural Resources, Scott Sheffield, said oil prices will likely increase to the $90/barrel-$100/barrel range by this summer.
Colonial Pipeline Co is allocating space for Cycle 13 shipments on Line 20, which carries distillates from Atlanta, Georgia to Nashville, Tennessee.
The U.S. Commerce Department confirmed that the economy grew solidly in the fourth quarter, though much of the increase in output came from unsold goods at businesses. It reported that GDP increased at a revised 2.7% annualized rate last quarter. That was revised down from the 2.9% pace reported in the previous month.
Early Market Call – as of 8:20 AM EDT
WTI – April $76.04, up 65 cents
RBOB – March $2.3807, up 12 points
HO – March $2.7404, up 3.23 cents
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