Stock Market

Oil prices mark 13-month highs as U.S. data hint at larger supply losses ahead

Oil futures settled at fresh 13-month highs Wednesday, as data from the U.S. government showed weekly crude supplies edged up on the back of a sharp decline in distillate inventories.

The inventory changes hinted at larger supply losses in the weeks ahead, amid energy production declines brought on by winter storms that swept across much of the U.S. last week.

“The EIA’s crude build reflected a fact that seemed to be forgotten by those expecting a draw to crude stocks: Texas is a far larger exporter of crude than importer,” said Troy Vincent, market analyst at commodity market analysis provider DTN.

Gulf Coast imports reportedly fell 533,000 barrels per day, while exports of crude declined by a reported 1.5 million barrels per day, leading to a crude stock build last week, he told MarketWatch.

“With both Texas refinery runs and crude production expected to suffer from lingering damage, the impact of the storm is set to continue to limit the global supply of both crude and products through the coming weeks,” said Vincent.

West Texas Intermediate crude for April delivery
CL.1,
+2.46%

CLJ21,
+2.46%

rose $1.55, or 2.5%, to settle at $63.22 a barrel on the New York Mercantile Exchange — the highest front-month contract finish since Jan. 6, 2020, according to Dow Jones Market Data.

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April Brent crude
BRN00,
-0.09%

BRNJ21,
-0.10%

climbed by $1.67, or nearly 2.6%, at $67.04 a barrel on ICE Futures Europe, with prices also at their highest since early January of last year. The most active May Brent contract
BRNK21,
-0.09%

added $1.70, or 2.6%, to $66.18.

The Energy Information Administration reported Wednesday that U.S. crude inventories climbed by 1.3 million barrels for the week ended Feb. 19. That defied expectations for an average fall of 4.8 million barrels, according to a survey of analysts polled by S&P Global Platts. The EIA data also showed crude stocks at the Cushing, Okla., storage hub rose by 2.8 million barrels for the week.

The American Petroleum Institute on Tuesday reported a roughly 1 million-barrel increase.

“Refinery runs dropped by 2.6 million barrels per day, with nearly 90% of that drop happening on the U.S. Gulf Coast amid the winter storm,” said Matt Smith, director of commodity research at ClipperData, in emailed commentary. “This drop in refining activity outpaced the fall in oil production, which averaged 1.1 million barrels per day lower across the week.”

“A significant drop in imports into the Gulf Coast, as well as into the Midwest, helped reduce supply,” leading to a minor build, said Smith.

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The EIA also reported that gasoline supply was “virtually unchanged,” while distillate stockpiles were down 5 million barrels for the week. The S&P Global Platts survey had forecast supply declines of 2.8 million barrels for gasoline and 3.5 million barrels for distillate inventories.

On Nymex, March gasoline
RBH21,
+1.65%

rose 2% at $1.8956 a gallon and March heating oil
HOH21,
+2.04%

tacked on 2.2% to $1.9083 a gallon. The March contracts expire at Friday’s settlements.

Oil futures ended on a mixed note Wednesday, with traders showing caution ahead of a key meeting next week of the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+.

Oil prices managed to finish near the day’s highs, despite a report Wednesday from Reuters that OPEC+ may discuss a production increase of 500,000 barrels per day starting in April, when the group meets.

Energy traders await weekly data on natural-gas supplies due Thursday, and expect to see a big decline.

“Significantly colder-than-normal temperatures across the middle of the country led to record production losses, sizeable demand curtailments and extremely elevated cash prices,” said Kevin Sakofs, an analyst with S&P Global Platts Analytics on Tuesday.

A survey of analysts from S&P Global Platts suggests that the EIA will report on Thursday a 333 billion cubic foot drop in U.S. natural-gas supplies for the week ended Feb. 19.

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On Wednesday, the March natural-gas contract
NGH21,
-0.45%
,
which expired at the end of the trading session, fell by 0.9% to $2.854 per million British thermal units. The soon to be front-month contract, April natural gas
NGJ21,
-1.93%

lost 2.2% to $2.795.

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