DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange posted tepid gains early Wednesday despite the American Petroleum Institute reporting U.S. commercial oil and product supplies surged by more than 17 million barrels (bbl) during the first week of 2023, in a sign of deeper demand losses this winter against rising domestic oil production.

U.S. commercial crude-oil inventories spiked by 14.865 million bbl last week, according to the data released late Tuesday from the American Petroleum Institute, which compares with expectations for stocks to decline by 600,000 bbl. If confirmed by EIA data, this would mark the largest crude build since late February 2021 when inventories surged by 21 million bbl amid collapsing fuel demand and surging COVID infections. Stocks at the Cushing, Oklahoma, tank farm, delivery point for West Texas Intermediate futures, also rose 2.3 million bbl in the reviewed week, despite a smaller 800,000 bbl oil transfer from the Strategic Petroleum Reserve to commercial side.

API data further revealed that gasoline stockpiles rose 1.8 million bbl on the week, well above calls for an increase of 600,000 bbl. Distillate inventories, meanwhile, increased 1.1 million bbl as of Jan. 6 versus expectations for a 700,000 bbl stock draw.

Traders will be closely monitoring the demand figures in this week's EIA report after cold weather severely disrupted gasoline and distillate fuel consumption in the final days of 2022. Combined fuel demand collapsed by 2.881 million barrels per day (bpd) as of Dec. 30. For the context, distillate consumption during the week-ended Dec. 30 fell to the lowest level since April 2020 at 2.799 million bpd. Next, traders are waiting for weekly inventory report from the U.S. Energy Information Administration scheduled for 10.30 a.m. EST release.

Further weighing on the oil complex, EIA's Short-Term Energy Outlook released on Tuesday showed global oil production this year would rise by 1.1 million bpd from the 2022 levels to 101.1 million bpd, driven by gains in several non-OPEC producers. The United States is forecasted to be the largest source of non-OPEC production growth for the reviewed period, contributing 40% of the gains in 2023 and 60% in 2024.

"U.S. growth is driven by increases in crude production in the Lower 48 states -- mostly in the Permian region -- as well as a combination of increases to production of hydrocarbon gas liquids and biofuels, which together account for about 40% of U.S. liquid fuels production growth in 2023 and 2024," said EIA in its monthly STEO.

Outside of the U.S., other major sources of growth in non-OPEC liquid fuels production come from Canada, Brazil, Guyana, and Norway.

Norway alone could add up to 500,000 bpd to the global oil market this year with the startup of the offshore Johan Sverdrup Phase 2 expansion project.

Near 7:30 a.m. EST, West Texas Intermediate for February delivery gained $0.32 to $75.42 bbl at $75.12, and Brent March futures on ICE added $0.47 to $80.57 bbl. NYMEX RBOB February contract advanced $0.0355 to $2.3632 gallon, and front-month ULSD futures rallied to $3.1758 gallon, up $0.0401 on the session.

Liubov Georges, 1.646.359.4088, liubov.georges@dtn.com, wwww.dtn.com.

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