Oil is down more than 1% today, testing early January lows, pressured by high gasoline inventories in the latest EIA report, the long-term impact of the U.S. operation in Venezuela, and generally weak market structure.
- U.S. commercial crude inventories fell 3.8 million barrels to 419.1 million barrels. Levels remain roughly 3% below the five-year average, providing fundamental support for the market, although this has not translated into higher prices today.
- At the same time, gasoline stocks surged by 7.7 million barrels and distillate inventories rose by 5.6 million barrels, which has weighed on sentiment, suggesting either weaker end-user demand or seasonal fuel build-ups.
- Refinery activity increased slightly, with crude runs averaging 16.9 million b/d, and utilization reaching 94.7%. Gasoline production declined, while distillate output increased, partially explaining the changes in fuel inventories.
- Crude imports jumped 1.4 million b/d week-on-week. Still, over the past four weeks, imports remain roughly 10% below year-ago levels, showing that the market is not structurally oversupplied.
- Despite the weekly increase, distillate stocks are still 43% below the five-year average, a significant risk factor given the winter season and heating fuel demand. Overall petroleum product consumption fell 1.9% y/y, with weakness most pronounced in distillates and jet fuel, while gasoline demand remained relatively stable.
The EIA report is mixed but not clearly bullish. Crude draws support prices, but strong gains in fuel inventories and weaker end-user demand limit upside potential. In the short term, the oil market remains vulnerable to corrections until a clear recovery in fuel consumption emerges.
EIA Key Data
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Cushing crude inventories: +0.728 million barrels (previous: +0.543 million)
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U.S. crude inventories: −3.832 million barrels (forecast: −1.0 million; previous: −1.934 million)
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Distillate inventories: +5.594 million barrels (forecast: +1.1 million; previous: +4.977 million)
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Gasoline inventories: +7.702 million barrels (forecast: +2.0 million; previous: +5.845 million)
Technical outlook (H1)
A drop below $60/bbl could theoretically trigger a 1:1 downside move toward $56/bbl if demand fails to lift prices back above $60 quickly.
Source: xStation5
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