A bearish EIA report yesterday saw the oil market give back some of Wednesday’s gains. Although tensions are still high in the Middle East with the launch of a maritime drone by Houthi rebels in the Red Sea, a US airstrike in Baghdad killed a commander of an Iran-backed militia group and was claimed by the Islamic State. responsibility for two explosions in Iran. earlier this week.
This week’s EIA release showed that U.S. commercial crude oil inventories declined by 5.5 million barrels over the week, although there were large increases on the products side. Gasoline inventories increased by 10.9 million barrels and distillate inventories grew by 10.09 million barrels. U.S. gasoline inventories have increased by more than 21 million barrels since mid-November and are again above the five-year average. Distillate stocks have risen by just over 20 million barrels since mid-November, although stocks are still below the five-year average. The large product backlog was mainly due to weaker demand. Implied demand for gasoline fell 1.21 MMbbls/d WoW, while implied demand for distillates fell 1.32 MMbbls/d. The rise of large distillates will do little to help end the broader weakness we have seen in mid-distillate cracks in recent months.
In Europe, the latest stock data from Insights Global shows that refined products inventories at ARA increased by 72,000 tonnes WoW to 5.07 million tonnes. This increase was driven by fuel oil, with stocks rising by 110,000 tonnes, while jet fuel inventories rose by 51,000 tonnes over the week. Diesel inventories fell by 38 thousand tons to 1.79 million tons, which leaves inventories still adjusted in historical terms for this time of year. In Singapore, stocks of petroleum products rose by 114 million barrels over the week to 42.67 million barrels. This increase was driven exclusively by fuel oil, with inventories increasing by 1.22 million barrels. Stocks of light and middle distillates fell during the week.
Saudi Aramco should soon publish its official selling prices (OSP) for February cargoes. The Saudis are expected to cut their OSP for Arab Light in Asia. This would follow a cut from $0.50/bbl to $3.50/bbl from the January benchmark.