Early morning losses have mostly faded away following the EIA’s inventory report, which showed a surprise across-the-board draw for oil products. Early losses were roughly $1/bbl for crude and $.02/gal for fuel, amid growing beliefs that global inventories are beginning to trend higher. The EIA’s data, however, upset that narrative and suggests that supplies remain tight.
Crude stocks ended the week down a hefty 4.6 million barrels, while diesel and gasoline inventories fell by 2.9 MMbbls and 0.7 MMbbls, respectively. The report shows a counter-seasonal trend – fuel inventories typically rise in the winter. Consumers curtail much of their driving due to cold weather, and refiners are increasing to get ahead of next spring’s demand.
The IEA’s report yesterday noted that demand continues rising strongly, which was reflected in the US EIA report this morning. Diesel demand was a hefty 4.9 MMbpd last week (up 30% from the prior week) and gasoline demand rose 6% to 9.4 MMbpd. Globally, though, the demand picture is less rosy. The world’s largest oil importer, China, curtailed holiday travel this year due to COVID-19, which will surely impact global demand. The global benchmark for crude oil, Brent crude, saw its future prices briefly flip to contango, meaning that future prices were higher than today – a sign of oversupply.
Oil prices see best week since August as virus fears subside
Oil set its biggest weekly gain in more than three months as the worst fears over the new virus strain have receded. West Texas Intermediate futures climbed 8.2% this week. Fuel consumption so far has escaped any major blows from the omicron variant. Yet confidence is limited. Rallies are still punctuated by selloffs such as that on Thursday after rising infection rates prompted some governments to tighten travel restrictions.
Oil settles lower on oversupply concerns, strong dollar
Oil futures prices dropped toward $73 a barrel on Tuesday after the International Energy Agency (IEA) said the Omicron coronavirus variant is set to dent global demand recovery. U.S. data showing producer prices at 11-year highs reinforced market expectations of faster stimulus tapering by the Federal Reserve, which meets this week. This supported the dollar and weighed on oil, which typically move inversely.
Where gas prices are headed in 2022, according to leading forecast models
Demand for petroleum absolutely crashed at the onset of the 2020 lockdowns as air travel, cruise trips, and daily office commutes evaporated. The ensuing buildup in crude oil supply—and the lack of places to store it—culminated in the futures price of domestically produced crude briefly going negative in April 2020.
Saudi Arabia: Hasty Energy Transition Will Lead To Oil Price Spikes
The energy transition and the shift toward renewable energy have to be managed very carefully in order to prevent a surge in oil prices as energy demand continues to rise, according to Saudi Arabia’s finance minister. “We have very serious concerns that the world could run short of energy if we are not careful in managing the transition,” Mohammed Al-Jadaan, the finance minister of the world’s largest oil exporter, said on Monday.