Oil prices fell yesterday after the EIA reported an unexpected build in crude oil inventories over the last week. However, tension in the Middle East continues to grow with the Houthis launching a large missile and drone attack in the Red Sea. The attack targeted both commercial vessels and warships, but reports suggest that there was no damage to vessels or injuries.
EIA weekly inventory data shows that US commercial crude oil inventories increased by 1.34m barrels over the week, which was quite different to the 5.2m barrel draw the API reported the previous day. While crude oil imports fell by 654k b/d WoW, exports fell by 1.9m b/d, which led to the build. Refinery activity also slowed slightly over the last week with utilisation rates falling from 93.5% to 92.9%. Despite this lower activity, there were significant builds in product stocks. Gasoline and distillate stocks increased by 8.03m barrels and 6.53m barrels respectively. With gasoline stocks standing at almost 245m barrels, they are hovering above the 5-year average. Meanwhile, distillates have now seen seven consecutive weeks of increases, which has seen stocks build by 26.8m barrels over this period. However, distillate stocks are still trending below the 5-year average. Overall, the EIA’s report was bearish with large builds in crude and product stocks.
European gas prices were relatively well supported yesterday with TTF settling just shy of 1% higher, ensuring the market remains above EUR30/MWh. The barrage of attacks in the Red Sea by the Houthis would have provided some support. Obviously, with Europe more reliant on LNG imports since the Russia/Ukraine war, the European market will be more vulnerable to developments in the LNG market. The flows towards Europe which are at most risk from these attacks would be Qatari LNG flows. In 2023, about 12% of European LNG imports came from Qatar.
There is little on the energy calendar today. We will get refined product inventory numbers for the ARA region from Insights Global, while Singaporean weekly refined product inventory data will be published. On the gas side, the EIA will release its weekly storage data report. The market is expecting US gas storage to have fallen by around 122bcf over the last week, higher than the 5-year average of an 89 bcf decline.