DTN Oil

WASHINGTON (DTN) -- Crude and refined products futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange pushed higher in pre-inventory trade Wednesday, with prompt-month West Texas Intermediate reaching a fresh 11-month high after industry data showed U.S. commercial crude oil inventories declined more than expected during the week ended Jan. 8 while a build in gasoline supplies was below consensus.

Near 7:30 a.m. ET, U.S. Dollar Index gained slightly against major currency peers to trade at 90.225, moving off an 89.890 overnight low, lending tepid support to WTI futures. The U.S. crude benchmark for February gained 23 cents to $53.42 per barrel (bbl) after rallying nearly $1 in the previous session. March Brent contract on ICE climbed 13 cents to $56.71 bbl. NYMEX February ULSD futures added 0.62 cents to $1.6029 gallon, with the front-month RBOB contract advancing 1.26 cents to trade near $1.5656 gallon.

The American Petroleum Institute reported late Tuesday U.S. commercial crude oil supplies dropped 5.821 million bbl last week, exceeding expectations for a 1.9 million bbl draw, while stocks at the Cushing, Oklahoma hub declined 232,000 bbl. If confirmed by Energy Information Administration data, it would be the fifth consecutive weekly drawdown and press domestic crude stockpiles to the lowest level since mid-March at 479.679 million bbl. Gasoline stockpiles increased 1.876 million bbl versus expectations for a 2.1 million bbl build and distillate inventories jumped above consensus with a 4.43 million bbl increase.

Morning gains in the oil complex once again reflect expectations the global oil market would tighten in the first quarter following a surprise move by Saudi Arabia on Jan. 5 to unilaterally cut 1 million barrels per day (bpd) in the kingdom's production in February and March. Media airwaves were hit with headlines this week that the world's largest oil exporter reduced its crude allocations for some of Asia's major refiners by as much as 25% in February as the Saudis act on their pledge.

In their latest monthly outlook, EIA forecast global oil inventories would decline at a rate of 600,000 bpd this year and 500,000 bpd in 2022. Even though demand is expected to take a major hit in the first quarter from lockdowns, the agency boosted its forecast for Brent prices by $4.25 bbl from its December's outlook to $52.75 bbl and the WTI price to average $49.75 bbl, up $4 bbl.

United Arab Emirates Energy Minister Suhail Mohammed Faraj Al Mazroui on Wednesday shrugged at market concerns over divisive rhetoric within OPEC+, saying Russia and Kazakhstan were given an exemption to boost output because they need to produce more to fulfill domestic needs during the winter months.

"If every country would look only at its markets share, we will never be able to balance the market," he added.

On Jan. 5, the 23-nation coalition agreed to roll over most of the 7.2 million bpd in production cuts into February and March, while allowing non-OPEC members Russia and Kazakhstan to increase production by a combined 75,000 bpd each month. OPEC+ will reconvene March 4 to review the agreement and market conditions.

Liubov Georges can be reached at liubov.georges@dtn.com