Oil patch: crude prices falling after the Federal Reserve’s comments and inventory build

Benchmark West Texas Intermediate (WTI) crude oil price traded down to $76.6 per barrel this week and seem to be stuck in a $70-$80 range this year. Traders grew cautious yesterday after Jerome Powell’s testimony in Congress triggered a selloff in energy futures.

Inventories building, demand slowing

Commercial crude inventories been building for the past 11 straight weeks, ahead of the typical seasonal pattern, up by 62 million barrels since mid-December
Today’s Department of Energy’s Petroleum Report saw petroleum product inventories building against the seasonal trend
Overall, petroleum product inventories increased by 2 million barrels, and are 2% above the 5-year seasonal average
Implied oil demand fell by 1.4 million barrels per day, with gasoline and diesel demand dropping by 0.5 million and 0.3 million barrels per day respectively
Crude oil inventories saw a 1.7 million barrels drawdown, even though exports dropped by 2.3 million barrels per day
Gasoline inventories were down by 1.13 million barrels,some 4% below the 5-year seasonal average
Diesel inventories were up slightly, even with exports increasing for the week
Diesel imports weaker
European diesel imports were significantly down, by 270 million barrels, compared to a large amount of pre-buying ahead of sanctions on Russian diesel
The region will continue to ramp up distillate imports from the Middle East and Asia to fill the gap left by Russian diesel
In Europe, there has been a drop diesel and gasoil inventories in the so-called ARA storage hub (Amsterdam-Rotterdam-Antwerp)
Europe needs to ramp up distillate imports from the Middle East and Asia to fill the gap left by Russian diesel

Keystone pipeline

The US Pipeline and Hazardous Materials Safety Administration (PHMSA) ordered TC Energy to reduce operating pressure on more than 1,000 additional miles of the strategically important Keystone pipeline
TC Energy claimed that technical factors in pipeline construction including bending stress and a weld flaw might have been the cause of a spill which is expected to cost around $480 million

Oil market analysis by Alex Hodes

Contact: Alex.Hodes@StoneX.com

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