DTN Oil

WASHINGTON, D.C. (DTN) -- Reversing earlier losses triggered by a bearish U.S. oil inventory report, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled higher Wednesday after Turkish officials acknowledged damages to the Kirkuk-Ceyhan pipeline carrying oil from Iraq to Mediterranean ports as the key export facility in Ceyhan remains shutdown a third straight day.

Turkey's oil terminal at Ceyhan, with export capacity of 1 million bpd or 1% of the global oil supply, has been shut down temporarily after the deadly earthquake Monday disrupted oil flows on Kerkuk-Ceyhan pipeline and Baku-Tbilisi-Ceyhan pipeline. Both pipelines have remained shut down since Monday morning. On Wednesday afternoon, Turkish officials admitted that one of the pipelines carrying oil from Iraq has indeed sustained "some damages" but refused to give details on the extent. The pipeline runs from the Iraq border in eastern Turkey to Ceyhan, passing through the region north of south-central Turkey's Gaziantep where a magnitude 7.8 quake struck early Feb. 6 causing thousands of deaths and extensive damage. During 2022, Iraqi flows through the Iraq-Turkey pipeline to Ceyhan averaged 477,000 bpd, down 6.8% from 2021 and down 10.3% from 2019. Kurdistan exported 376,000 bpd through the pipeline in January, down from 417,000 bpd in December, figures show. Oil traders will continue to closely monitor the situation around the pipeline's restart.

Limiting gains for the oil complex is yet another bearish inventory report released this morning by the U.S. Energy Information Administration, showing total crude and petroleum products supplies spiked more than 10 million bbl last week as domestic producers raised output to the highest level since April 2020. U.S. commercial crude oil inventories increased for an eighth consecutive week through Feb. 3, building by a massive 34.4 million bbl since the start of the year. At 455.1 million bbl, nationwide crude-oil inventories currently stand 4% above the five-year average.

A larger-than-expected build occurred even as exports softened to 2.940 million bpd, down 592,000 bpd from the previous week, and producers boosted output to 12.3 million bpd -- the highest output rate since the coronavirus pandemic erased a chunk of domestic oil production. That more than offset a larger-than-expected increase in refinery crude throughput to 15.4 million bpd. On the week, refiners raised run rates by 2.2% to 87.9% of capacity compared with expectation for a 0.5% bump. Oil stored at the Cushing, Oklahoma hub, the delivery point for West Texas Intermediate, jumped 1.1 million bbl from the previous week to 39.1 million bbl. In the gasoline complex, commercial stockpiles built by 5 million bbl in the reviewed week to 239.6 million bbl compared with expectations of a 1.4 bbl increase. Demand for motor fuel remained anemic at 8.428 million bpd, down by 62,000 bpd. Distillate demand, however, increased by 70,000 bpd to 3.762 million bpd.

Domestic distillate stocks increased by 2.9 million bbl to 120.5 million bbl.

At settlement, West Texas Intermediate futures for March delivery rallied to $78.47 bbl, up $1.33 on the session. The international crude benchmark Brent contract on ICE advanced to $85.09 bbl, up $1.40 bbl. NYMEX RBOB March contract rose 0.60cts to $2.4628 gallon, and March ULSD futures declined 1.11cts to $2.8933 gallon.

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