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U.S. crude oil edged lower Wednesday after government data showed a bigger than expected 4.2M-barrel build in crude stocks for last week, along with continued declines in gasoline and distillate fuel inventories.
The U.S. Energy Information Administration reported domestic commercial crude inventories rose for the fifth straight week, while U.S. refineries increased their capacity use for the first time this year, after weather-driven outages in January and other stoppages.
U.S. oil production was unchanged at a record 13.3M bbl/day, while crude stocks at the Cushing, Oklahoma, Nymex delivery hub rose 1.5M barrels at 31M barrels.
While U.S. crude stocks have been building, “the global market has been tightening… evident from examining time spreads which have become increasingly backwardated as we have moved through February,” DTN analyst Troy Vincent told MarketWatch.
The EIA said refinery utilization rates edged up 0.9 percentage points last week to 81.5% of total capacity, operating below 83% utilization for the past month, the longest such streak in nearly three years.
Refiners are “not making a real effort to rapidly come out of the shutdowns experienced in the aftermath of the cold snap,” Again Capital’s John Kilduff said, adding the continued outage at BP’s 435K bbl/day Whiting refinery, the Midwest’s largest plant, also has reduced fuel stock levels.
Front-month Nymex crude (CL1:COM) for April delivery ended -0.4% to $78.54/bbl, losing a little ground after back-to-back daily gains, while front-month April Brent crude (CO1:COM) added $0.03 to $83.68/bbl, enough to reach its highest settlement value since November 6.
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Reports that said OPEC+ may extend voluntary production cuts into Q2 and signs of tighter global supplies likely provided some support to the oil market.
DTN’s H1 2024 outlook forecasts that OPEC+ may be forced to continue to extend output cuts beyond Q1 “in order to support prices, and we continue to believe that this will be the case,” Vincent said.