DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange declined on Thursday as investors sought clarity on the potential restart of Turkey's Ceyhan export hub after Azerbaijan declared force majeure on crude loading along the Baku-Tbilisi-Ceyhan pipeline, which carries around 1.2 million bpd of oil from Caspian fields to the Turkish port.

Wire services on Thursday reported that there are signs of extensive damage at one or two of the storage tanks at the Ceyhan port, with combined throughput capacity of 1 million bpd or 1% of global oil supply. Ceyhan port has now been shut for a fourth day following a 7.8 magnitude earthquake that struck the northeastern part of Tukey and Syria, killing more than 20,000 people.

Loading operations from the BTC terminal have been temporarily interrupted, according to a force majeure notice released by BP Azerbaijan, as further assessments are carried out on pipeline operations. Bloomberg News further reported that Azeri crude loadings at the Turkish port of Ceyhan are not expected to be restored until late next week.

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 their extent. The pipeline runs from the Iraqi border in eastern Turkey to Ceyhan, passing through the region north of south-central Turkey. 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 showed. Oil traders will continue to closely monitor the situation around the port's restart.

Another bearish inventory report released Wednesday by the U.S. Energy Information Administration weighed on the oil complex, 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. Commercial crude 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 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 expectations for a 0.5% bump. Oil stored at Cushing, Oklahoma hub, the delivery point for West Texas Intermediate, jumped 1.1 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, up by a modest 70,000 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, WTI futures for March delivery declined to $78.06 bbl, down $0.41 on the session. The international crude benchmark Brent contract on ICE fell below $85 bbl to $84.50 bbl, down $0.59 bbl. NYMEX RBOB March contract dropped $0.0153 to $2.4475 gallon, and March ULSD futures declined a steep $0.0779 to $2.8154 gallon.

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