DTN Oil

WASHINGTON (DTN) -- Crude and refined products futures on the New York Mercantile Exchange and Intercontinental Exchange were little changed Thursday, with both crude benchmarks holding near 11-month highs on their spot continuous charts as traders assess the effects of a change in policy course amid President Joe Biden's first executive actions on climate and energy infrastructure, including a temporary suspension for oil and gas leasing on federal lands, revoking the construction permit for the Keystone XL oil pipeline and recommitting the United States to the Paris Climate Agreement.

Biden's climate agenda delivered little surprise to the market that has long geared towards restrictive legislation for the oil industry that, nonetheless, is expected to have minimal impact on actual supply-demand balances or the energy system. Despite an abrupt suspension of a cross-border permit for the Keystone XL pipeline and loss of thousands of jobs affiliated with it, it "does not change the production outlook for Canada/Alberta," according to DNB Markets' Helge Andre Martinsen.

The proposed Keystone XL pipeline would be capable of delivering 830,000 barrels per day (bpd) of crude oil from Hardisty, Alberta, to Steele City, Nebraska, where it would connect with the company's existing pipeline system to reach U.S. Gulf Coast refiners. Absent the pipeline, which has a greater adverse effect for Canadian oil producers and the Alberta and Canadian economies, U.S. Gulf Coast refiners will continue their struggle in procuring the heavy crude grades needed for their complex refineries amid U.S. sanctions on Venezuelan and Iranian oil exports. Gulf Coast refiners have replaced their diet of heavy crude from Venezuela with Canadian crude, but an increase in demand could trigger a return to crude shipments by rail, a more costly and less efficient transportation option with higher emissions and a greater risk of spills.

On the other hand, Biden's rejoining the Paris Agreement theoretically could depress an expected rebound in the country's oil consumption. But even then, the pandemic has probably caused more structural changes to fuel demand than the Paris Climate Agreement could ever have. Analysts have long pointed that the agreement does very little to tackle climate change while inflicting disproportionally high costs on the U.S. taxpayer. John Kemp, an analyst at Reuters, cautions that the share of different energy sources in total energy consumption have changed very slowly over the last five decades, usually by no more than just a few tenths of a percentage point per year. Therefore, despite Biden's tough stance on fossil fuels and climate change, the shape of the American energy system is unlikely to see any substantial changes in the next four to eight years, reflecting a more pragmatic reality for the Biden administration.

Thursday's muted price moves follow the inventory report from the American Petroleum Institute late Wednesday showing U.S. commercial crude oil supplies rose 2.562 million barrels (bbl) in the week ended Jan. 15 versus calls for a draw of 1.3 million bbl; stocks at the Cushing, Oklahoma, hub slid 4.285 million bbl.

Gasoline stockpiles built by 1.129 million bbl, below calls for a 2.1 million bbl gain while distillate inventories added 816,000 bbl, less than a projected 1.1 million bbl gain.

The closely watched inventory report from the U.S. Energy Information Administration is scheduled this week for an 11 a.m. EST release on Friday, delayed two days due to Inauguration Day.

On the session, West Texas Intermediate futures for March delivery slipped 18 cents to settle at $53.13 bbl, and the March Brent contract on ICE finished up 2 cents at $56.10 bbl. NYMEX February ULSD futures posted little change on the session to settle at $1.6006 gallon and February RBOB futures gained 0.40 cents for a $1.5479 gallon settlement.

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