Singapore — 0255 GMT: Crude oil futures were lower during mid-morning trade in Asia Feb. 11 on the back of a build in US gasoline inventories and despite the sharp drop in crude oil stocks.
At 10:55 am Singapore time (0255 GMT), ICE April Brent crude futures fell 37 cents/b (0.6%) from the Feb. 10 close at $61.10/b while the NYMEX March light sweet crude contract was 34 cents/b (0.58%) lower at $58.34/b.
US commercial crude oil inventories fell 6.6 million barrels to 469 million barrels in the week ended Feb. 5, according to the latest weekly report by the US Energy Information Administration released late Feb. 10. However, total motor gasoline inventories, said to be one of the key determinants in gauging demand sentiment for the overall fuel complex, rose by 4.3 million barrels.
“Crude oil stockpiles fell to their lowest level since March 2020. However, sentiment was curtailed by a rise in gasoline inventories,” ANZ analysts said in a note Feb. 11.
Oil prices have hit highs in recent trading sessions, due to an amelioration of bullish factors such as vaccine rollouts, expectations of demand recovery, and OPEC+ production cuts. This has led some analysts to warn that the market may be in danger of overheating.
Some noted that the higher prices may induce producers to supply more, thereby sending prices south instead.
“Oil prices couldn’t hold onto its gains possibly on the expectation that Saudi Arabia could roll back their unilateral February/March production cuts and that OPEC could signal more production coming back online at the March meeting given the sizzling recovery in oil prices,” Stephen Innes, chief global markets strategist at Axi, said in a note Feb. 11.
Beyond the short term, market participants still hold much optimism and believe that the pace of demand recovery will be such that supply will not be able to keep up.
French oil major Total said in its Q4 earnings call on Feb. 9 that global shortfall in supply could be 10 million b/d from now till 2025.
“There is a risk of supply crunch in the mid-term,” Helle Kristoffersen, Total’s president for strategy and innovation said on the call.
“We have seen in 2020 how OPEC managed to bring back market discipline. We’ve seen the cracks in the US shale model, and we’ve seen a continued underinvestments in the oil industry as a whole,” he added.
