Oil Prices Retreat Amid Volatile Markets and U.S. Reserve Sale

On Tuesday, oil prices decreased following the US’s announcement that additional inventory will be released from the Strategic Petroleum Reserve, which has already caused a high degree of instability in the worldwide supply and demand balance.[0] At 9:15 ET, U.S. crude futures had decreased by $2.21 (2.8%) to $77.93 per barrel, and Brent crude futures had decreased by $2.01 (2.3[1] The two standards are projected to experience their greatest single-day percentage drops since February 3rd.[1]

The Energy Information Administration (EIA) reported on Wednesday that U.S. crude inventories rose by 16.283 million barrels during the week ended Feb. 10, and are now 8% above the five-year average. Commercial crude-oil stockpiles increased by 16.3 million barrels, to 471.4 million barrels. The American Petroleum Institute (API) late Tuesday had reported a 10.5 million barrel rise in U.S. crude inventories.[2]

According to the API data from last week, gasoline inventories increased by 846,000 barrels, bringing the total inventory increase to 5.261 million barrels.[3] Distillates increased by 1.728 million barrels following an increase of 1.109 million bpd the week before.[3] The weekly capacity utilization rate of refinery activity declined to 86.5%, a 1.4 percentage point decrease that was unexpected and contrary to analyst predictions of a 0.2 percentage point increase.[4]

The Paris-based International Energy Agency (IEA) Wednesday raised its 2023 global oil demand forecast by +200,000 bpd to 101.9 million bpd from a prior estimate of 101.7 million bpd, citing the reopening of China’s economy.[5] The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday also raised its projection for global oil demand growth and pointed to a tighter market in 2023.[6]

On Tuesday, oil prices decreased further following the release of inflation data that indicated the Federal Reserve may not reduce interest rates as much as had been predicted.[7] Monday’s session was volatile and caused West Texas Intermediate to plummet to nearly US$79 per barrel.[8] In line with a budget mandate from 2015, the United States is aiming to dispose of 26 million barrels from the Strategic Petroleum Reserve.[2] WTI crude oil was down following the US CPI but the bulls burst back to life taking out the shorts back to the start again.[9]

0. “Latest Oil Market News and Analysis for Feb 13” Bloomberg, 12 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-12/oil-edges-lower-as-slowdown-concerns-vie-with-russian-cutback

1. “Biden To Sell 26 Million Barrels From the Strategic Petroleum Reserve in Hopes of Preventing Summer Gas Surge” msnNOW, 14 Feb. 2023, https://www.msn.com/en-us/money/markets/biden-to-sell-26-million-barrels-from-the-strategic-petroleum-reserve-in-hopes-of-preventing-summer-gas-surge/ar-AA17u8FD?li=BBnb7Kz

2. “Oil declines on U.S. requirement to sell more crude from the SPR” BNN Bloomberg, 14 Feb. 2023, https://www.bnnbloomberg.ca/oil-declines-on-u-s-requirement-to-sell-more-crude-from-the-spr-1.1883387

3. “Massive Crude Build Pressures Oil Prices” OilPrice.com, 14 Feb. 2023, https://oilprice.com/Latest-Energy-News/World-News/Massive-Crude-Build-Pressures-Oil-Prices.html

4. “Energy stocks stumble as U.S. crude oil inventories surge higher (NYSEARCA:USO)” Seeking Alpha, 15 Feb. 2023, https://seekingalpha.com/news/3936499-energy-stocks-stumble-as-us-crude-oil-inventories-surge-higher

5. “Crude Falls On Dollar Strength And Surge In EIA Crude Inventories” Barchart, 15 Feb. 2023, https://www.barchart.com/story/news/14237607/crude-falls-on-dollar-strength-and-surge-in-eia-crude-inventories

6. “WTI Oil Price Forecast: Eyeing Potential Bounce Off 50-Day MA” DailyFX, 15 Feb. 2023, https://www.dailyfx.com/news/forex-wti-oil-price-forecast-eyeing-potential-bounce-off-50-day-ma-20230215.html

7. “Crude Inventory 16.28M Barrels vs 1.38M Expected” Forex Factory, 15 Feb. 2023, https://www.forexfactory.com/news/1205830-crude-inventory-1628m-barrels-vs-138m-expected

8. “Oil Slips as US Supply Build Overshadows Stronger China Outlook” Financial Post, 15 Feb. 2023, https://financialpost.com/pmn/business-pmn/oil-extends-drop-on-large-stockpile-build-and-inflation-concerns

9. “WTI Price Analysis: Bulls and bears in battle it out at key support” FXStreet, 15 Feb. 2023, https://www.fxstreet.com/news/wti-price-analysis-bulls-and-bears-in-battle-it-out-at-key-support-202302150018