Oil is rising with the decline in US fuel stocks … and OPEC is considering an extension


Oil prices rose more than 2% on Wednesday, supported by a sharp decline in US fuel stocks and speculation that OPEC Plus producers may decide not to increase production when they meet this week. US gasoline stocks fell last week, the biggest drop on record, and refinery production fell to a record low in the wake of freezing weather in Texas that disrupted production.
Gasoline stocks fell to 243.5 million barrels, according to the US Energy Information Administration, while distillate stocks fell, their biggest drop since 2003, to 143 million barrels.
“The drop is entirely due to the Texas storm,” said John Kilduff, partner at Again Capital in New York. “The supply chain in Texas has completely frozen and has caused a drawdown of inventories of refined products.”
Crude inventories rose 21.6 million barrels, the largest on record, to 484.6 million barrels, according to the Information Administration. Refinery capacity utilization rates decreased to no more than 56 percent of the total capacity, recording the lowest level ever, with the rate in the US coast on the Gulf of Mexico plummeting to 40.9 percent, which is also the lowest level ever.
By 1611 GMT, Brent was up $ 1.30, or 2.1 percent, to $ 64 a barrel. U.S. West Texas Intermediate crude added $ 1.55, or 2.6 percent, to $ 61.30.
Prices had jumped earlier after Reuters reported, citing three sources, that the OPEC + group, made up of the Organization of the Petroleum Exporting Countries and allies including Russia, was considering extending production cuts until the end of April instead of increasing production.
On Tuesday, a document prepared by OPEC Plus experts and seen by Reuters called for “cautious optimism”, citing “the uncertainty inherent in the present markets and sentiment at the macroeconomic level, especially the risks from the Covid-19 spikes that are still on the rise.”
She said she believes the recent rise in the price of oil may be due to more financial players than an improvement in market fundamentals.
OPEC expects global oil demand to grow in 2021 by 5.8 million barrels per day to about 96 million barrels per day, which remains below the demand level in 2019, which was about 100 million barrels per day.
It is widely expected that Russia will push in the direction of more increases, but in February it failed to raise production despite receiving the green light for that from OPEC Plus, as severe winter weather affected the production of the aging fields.
JP Morgan, who said he had spoken to Dennis Dreyushkin, Russia’s representative on the OPEC Plus technical committee, said that Russia sees a justification for raising production, as the oil market is still experiencing a deficit of 500,000 barrels per day.
The bank said, “Russia believes that if production is maintained at current levels, the market will move to a more severe deficit … As such, there is a need to restore production, but the speed and quantity have not been decided yet.” (Reuters)


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