Oil Futures Rise Modestly

Oil futures rose modestly on Wednesday as traders assessed U.S. production and inventory data, while downplaying the possibility of supply disruptions in the Middle East.

Price Moves

• West Texas Intermediate crude for March delivery rose 0.8%, reaching $73.88 a barrel on the New York Mercantile Exchange.
• April Brent crude, the global benchmark, was up 0.8%, reaching $79.20 a barrel on ICE Futures Europe.

Market Drivers

Despite escalating conflict in the Middle East, oil prices have remained relatively stable, without a significant risk premium.

According to commodity strategists at ING, market participants seem to believe that there will not be a substantial escalation in the Middle East that would threaten oil supply.

They note that although trade flows have been disrupted due to developments in the Red Sea, oil production has not been affected. Additionally, the oil balance remains favorable throughout the first half of 2024, with OPEC holding over 5 million barrels per day of spare capacity, more than 3 million of which is in Saudi Arabia.

U.S. Crude Oil Output Expected to Grow in 2024

According to the Energy Information Administration’s monthly report, U.S. crude oil output is projected to increase by approximately 170,000 barrels per day in 2024. This would result in an average production level of 13.1 million barrels per day (mbd). While this forecast is slightly lower than last month’s estimate of 13.21 mbd, it is worth noting that U.S. crude supply saw a growth of just over 1 mbd last year. The slowdown in drilling activity observed throughout the past year contributes to this decrease in the growth rate.

The American Petroleum Institute recently reported an increase of 674,000 barrels in U.S. crude inventories for the previous week. Additionally, gasoline stocks rose by 3.7 million barrels, while distillate supplies experienced a decline of 3.7 million barrels.

Official figures from the EIA will be released on Wednesday morning. Analysts anticipate that these data will reveal a rise of 600,000 barrels in commercial, domestic crude supplies for the week ending February 2nd. They also predict a 300,000 barrel increase in gasoline inventories and a reduction of 2.4 million barrels in distillate stockpiles.