Oil futures: Crude higher after EIA data report, spreads hold firm

Quantum Commodity Intelligence – Crude oil futures Thursday were edging higher, as benchmarks moved to the upper reaches of the recent range to trade at around February highs.

Front-month Apr24 ICE Brent futures were trading at $83.61/b (1825 GMT) compared to the day's high of $83.96/b and Wednesday's settle of $83.03/b.

Apr24/May24 Brent also moved out to $1/b, the widest front spread since October, following an outage on a UK crude oil pipeline, which is forcing the Grangemouth refinery to take in more benchmark Forties crude.

At the same time, Apr24 NYMEX WTI was trading at $78.58/b versus Wednesday's settle of $77.91/b, while the front spread was around +$0.70/b.

Geopolitical tensions and Red Sea shipping disruptions remain the primary driver for oil prices, although mobility data from China's eight-day Lunar New Year Holiday has also lifted sentiment this week.

Domestic travel over the period was registered at 474 million trips, a steep rise on the year and 19% above the same period in 2019, boding well for gasoline and jet demand.

Demand growth in China is a main bone of contention between OPEC and the IEA, with the two agencies some 1 million bpd apart in the global outlook for this year, but positive data from China was seen underpinning the more bullish forecasts.

"The drift in forecasts over the past three months has, with the exception of the IEA, been gently upwards, implying an improvement in overall market fundamentals," said Paul Horsnell, Head of Commodities Research at Standard Chartered Bank.

Meanwhile, Israel is reportedly planning to attend another high-level summit in Paris on Friday, with cabinet minister Benny Gantz commenting that there were early signs of progress on releasing the remaining hostages. However, Gantz said on Wednesday if a deal is not reached, Israel will invade the southern Gaza city of Rafah.

Inventories

Data from the Energy Information Administration released Thursday revealed crude inventories increased by 3.5 million barrels last week, which was viewed as moderately bullish as the figure came in slightly under expectations and well below estimates from the API.

Markets had earlier shrugged off the latest data from the American Petroleum Institute, which revealed a steep 7 million barrel build in crude stocks, against analyst expectations for an increase of around 4.3 million barrels.

But the build in crude inventories was cushioned by a 2.9 million barrels fall in distillates stockpiles, although gasoline was up 415,000 barrels.

US natural gas prices rebounded more than 10% on Wednesday from this week's multi-year lows after gas producer Chesapeake announced it would slash gas production this year due to tumbling prices.

However, analysts noted that the reductions will come from Marcellus and Haynesville, which are largely stand-alone gas plays rather than associated gas such as that produced in the Permian Basin.

On the economic front, minutes from the Fed's January FOMC meeting were in line with expectations, with the bulk of the committee noting the "risks of moving too quickly" on interest rates, highlighting the risks of persistent inflation.