Market Intel

US gasoline consumption contributed to rise in oil prices

Feb 10, 2017

Recap:  Wednesday's rise in oil prices continued into Thursday's session on signs that U.S. gasoline consumption is better than expected. March WTI rose to a high of $53.21 prior to slicing gains for a settlement at $53.00 a barrel, up 66 cents, or 1.26%. Brent for April delivery climbed 51 cents, or 0.93%, to settle at $55.63 a barrel.

Production cuts from within OPEC and overflowing U.S. supplies of oil are working against each other and as a result WTI remains within the trading range that dates back to the beginning of December. While the futures market remains range bound, continued cutbacks by OPEC, along with strong gasoline demand in the U.S., could push prices out of the range of $51-$56.

After bottoming at $9.91 on Tuesday, the March RBOB/WTI crack spread retraced 50% of its fall from a high of $16.91 made back in December. This spread touched $13.43 today before paring gains for a settlement of $12.94, up 7 cents from Wednesday. March RBOB settled at $1.570 a gallon, up 1.8 cents, or 1.1%, while March heating oil gained just over half a cent to $1.642 a gallon.

Fundamental NewsGenscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending February 7th increased by 1.2 million barrels to 67.2 million barrels.

Saudi Arabia's Energy Minister, Khalid al-Falih, met Venezuela's foreign and energy ministers, Delcy Rodriguez and Nelson Martinez, respectively, in Riyadh to review oil market conditions and the importance of keeping them stable. 

Iran's crude oil and condensate exports in January increased 3% on the month as it continued to regain market share.  Total estimated export volumes from Iranian ports in January increased to 2.162 million bpd from 2.102 million bpd in December.  Iran's output in January increased to 3.72 million bpd, up 30,000 bpd on the month. 

An Iraqi Oil Ministry statement said five oil wells are still burning out of 25 that Islamic State set on fire in Qayyara, south of Mosul.  North Oil Company crews are working to control the fires torched by the hardline militants to slow down the advance of US backed Iraqi forces toward Mosul. 

Goldman Sachs said oil market re-balancing will take time due to a surprise increase in US production and high fuel inventories.  It sees imports as the key driver to the large builds and as the reflection of the fourth quarter 2016 global oil market surplus of more than 500,000 bpd.  It said the global oil market surplus in the fourth quarter of 2016 led to further rises in global inventories in January and as result the draws that it expects will start from a high base and need sustained cuts to normalize and achieve backwardation, with WTI likely lagging Brent.  It said that given OPEC and other producers are complying at a high level of 85% to their proposed output cuts, the import channel will reverse from March onward.  It stated that US production increased faster than it forecast and it believes the faster shale rebound is creating downside risk to its 2018 WTI price forecast of $55/barrel. 

Euroilstock reported that European crude and oil product stocks in January totaled 1.15 billion barrels, up 1.9% on the month but down 1.5% on the year.  European crude oil stocks increased by 3.2% on the month but fell by 1.6% on the year to 481.73 million barrels while gasoline stocks increased by 3.5% on the month but fell by 1.9% on the year to 122.06 million barrels and distillate stocks increased by 1.2% on the month and by 0.2% on the year to 449.7 million barrels. 

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp hub in the week ending February 9th fell by 9.62% on the week and by 25.68% on the year to 987,000 tons while gasoil stocks fell by 3.59% on the week and by 10.48% on the year to 3.17 million tons.

Early Market Call - as of 9:00 AM EDT

WTI - Mar $54.02, up $1.02

RBOB - Mar $1.6130, up 4.25 cents

HO - Mar $1.6753, up 3.34 cents

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