Oil prices rose yesterday, although they continue to trade within a fairly limited range. ICE Brent closed up 0.77% on the day, but the market continues to trade firmly below the $80 a barrel level. Given the increased geopolitical risk, the range-bound trading and lack of a risk premium may surprise some. However, market participants seem to assume that we will not see a significant escalation in the Middle East, at least an escalation that puts oil supplies at risk. It is important to remember that while we are seeing disruptions to trade flows as a result of events in the Red Sea, oil production remains unchanged as a result. Furthermore, the oil balance is comfortable until the first half of 24, while OPEC has just over 5 million b/d of excess capacity, of which more than 3 million b/d is in Saudi Arabia.
Overnight API figures show that US crude oil inventories rose by 674,000 barrels over the past week, which is slightly smaller than the roughly 2 million barrel increase the market was expecting. Additionally, Cushing crude oil inventories increased by 492,000 barrels during the week. In the case of refined products, gasoline inventories increased by 3.65 million barrels, while those of distillates decreased by 3.7 million barrels. The more closely watched EIA report will be released later today.
The EIA published its latest Short-Term Energy Outlook yesterday in which it forecasts that US crude oil production will grow by around 170 thousand b/d year-on-year in 2024 to an average of 13.1 million/d. This is slightly lower than the 13.21mb/d the EIA forecast last month. Last year, US crude oil supply grew by just over 1 million b/d and the drop in growth this year should not be a big surprise given the slowdown seen in drilling activity for much of the year. past. Meanwhile, by 2025, the EIA forecasts that crude oil supply will grow by just over 390 thousand b/d year-on-year to a record 13.39 mb/d.
Daily Norwegian gas flows to Europe remain around 15% lower than early February levels due to unplanned outages at the Troll field and the Nyhamna processing plant. However, flows should resume at more normal levels from tomorrow and the outages are only expected to last until today. While lower flows into Europe initially generated some strength in the market, the fact that the disruption is expected to be relatively brief, coupled with the fact that storage remains very comfortable at around 69% of capacity, suggests that prices are likely to remain under pressure.