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

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