DTN Oil

Oil Gains as Crude Stocks Fall, IEA Lifts Demand Outlook

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session with gains between 1.5% and 2%, spurred by upbeat demand projections from the International Energy Agency and a larger-than-expected drawdown from domestic crude oil inventories.

Thursday's inventory report from the U.S. Energy Information Administration was mostly supportive for the oil complex, showing a 2.5 million bbl decrease in commercial crude stockpiles accompanied by smaller builds in refined products supplies.

Domestic gasoline stocks rose 3.1 million bbl during the week-ended Jan. 12 compared with 8 million bbl build reported for the first week of January and 10.9 million bbl for the last week of December. At 248.1 million bbl, gasoline inventories currently stand in line with the five-year seasonal average.

Distillate inventories also increased by a smaller margin of 2.4 million bbl during the week ended Jan. 12 to 134.8 million bbl, ending last week 3.4% below the five-year average, easing concerns over a building supply overhang in middle distillates. Over the prior two weeks, commercial distillate stocks jumped by an outsized 16.6 million bbl.

Earlier in the session, the oil complex got tepid support from upbeat demand projections by IEA that upgraded its worldwide consumption growth forecast by 270,000 bpd this year to 1.2 million bpd. Despite the upgrade, production growth from non-OPEC+ countries is still expected to outpace gains in worldwide oil demand, leading to a well-supplied physical oil market in 2024.

Barring significant disruption to oil flows in the Middle East, global oil production is set to rise by 1.5 million bpd this year to a fresh record high 103.5 million bpd. The Americas -- led by the United States, Brazil, Guyana, and Canada -- will once again dominate production gains in 2024, just as the region did last year. Despite a healthy supply cushion, the Paris-based energy watchdog warns that the risk of global oil supply disruptions from the Middle East conflict remains elevated, particularly for oil flows through the Red Sea and Suez Canal.

"Rising geopolitical tensions in the Middle East, which accounts for one-third of the world's seaborne oil trade, has markets on edge at the start of 2024. US and UK airstrikes on Houthi targets in Yemen in response to attacks on tankers in the Red Sea by the Iran-backed group, have raised concerns that an escalation of the conflict could further disrupt the flow of oil via key trade chokepoints," said IEA in its monthly Oil Market Report.

At settlement, West Texas Intermediate for February delivery on NYMEX advanced $1.52 to $74.08 bbl, and ICE March Brent rallied to $79.10 bbl, up $1.22. NYMEX February RBOB futures added $0.0481 to $2.1835 gallon, and February ULSD futures gained $0.04 to $2.6936 gallon.

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

Liubov Georges