The EIA showed a less than expected build in U.S. crude oil inventories

Recap: Oil prices rose on Wednesday after the EIA report showed a less than expected build in U.S. crude oil inventories. Market analysts were expecting a build of 3.4 million barrels, while the EIA reported a build of 919,000 barrels. The anemic rise in crude oil stocks was due to a drop in imports, which fell 1.02 million barrels, to 5.14 million barrels per day. Meanwhile, traders remained on alert due to U.S. sanctions imposed on Venezuela, and their impact on exports out of that country. March WTI rose as much as 3 percent to a high of $54.93, while March Brent rose as much as 2.2 percent to a high of $62.67. Oil markets remain in a sideways trading pattern, with traders uncertain as to effect of the aforementioned sanctions. Gains were pared as the settlement period approached with March WTI settling at $54.23 a barrel, up 92 cents, or 1.73 percent and March Brent finishing at $61.65 a barrel, up 33 cents, or 0.54%.

U.S. gasoline inventories slipped from record levels, falling 2.2 million barrels last week, greater than the expected 1.9 million barrel gain. This is directly tied to the 586,000 barrel drop in refinery runs. The drop in inventories helped refining margins, with the March gasoline crack spread gaining 74 cents to settle at $4.87. February RBOB added 2.3% to $1.382 a gallon and February heating oil rose 0.05% to $1.898 a gallon.

Fundamental News: Iran’s Oil Minister, Bijan Namdar, Zanganeh, said Iran has a range of plans to increase its oil income by $20 billion.  He did not specify which oilfields would be targeted for development.  Separately, Iran’s Oil Minister said the country has been negotiating with China to develop phase two of the Yadavaran oilfield in the southwest of the country on the border with Iraq but added that talks did not lead to the signing of any agreement. 

Venezuela’s President Nicolas Maduro said calls to hold early presidential elections amounted to blackmail and that the countries calling for them must wait until 2025.  Venezuela’s President also called US sanctions imposed on Venezuela’s PDVSA this week illegal.  He said Caracas is taking all efforts to stabilize the Venezuelan economy.  He also stated that Venezuela always honors its financial obligations to creditors when asked if his government could offer guarantees it would repay loans to Russia and China.   

Venezuela’s PDVSA is facing problems discharging some tankers carrying imported fuel because new US sanctions are making it difficult to complete payments.  A PDVSA board member said PDVSA will insist the fuel cargoes are discharged and will try to pay for them. 

The IEA’s Executive Director, Fatih Birol, said the agency had yet to assess the impact of the latest US sanctions on Venezuelan oil supplies. 

Russia’s Deputy Prime Minister, Dmitry Kozak, said Russia hopes Venezuela, irrespective of internal political developments, will honor its obligations to Moscow, including towards oil projects.  Separately, Russia’s Energy Minister, Alexander Novak, said there had been almost no volatility at all on global oil markets from the turmoil in Venezuela but that it was hard to gauge what the impact could be in the future.  He said there were currently no plans to call an emergency meeting of OPEC and non-OPEC producers to discuss their global oil output deal in light of the satiation in Venezuela.  In regards to Russia’s oil production, he said Russia’s oil production fell by 50,000 bpd and added that it will try to cut oil production by about 50,000 bpd in February.    

IIR Energy reported that US oil refiners are expected to shut in 1.2 million bpd of capacity in the week ending February 1st, increasing available refining capacity by 17,000 bpd from the previous week.  IIR expects offline capacity to increase to 1.3 million bpd in the week ending February 8th. 

Early Market Call – as of 8:30 AM EDT

WTI – Mar $54.40, up 18 cents 

RBOB – Feb $ 1.3986, up 1.33 cents

HO – Feb $1.9089, up 1.06 cents

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