Oil prices rose by more than $2 a barrel on Wednesday

Market Insights
Heating Oil
December 22, 2022

Recap: Oil prices rose by more than $2 a barrel on Wednesday after data showed a larger-than-expected draw in U.S. crude stockpiles, but gains were capped by a snowstorm that is expected to hit U.S. travel. Prices were also boosted by hopes that China would relax some COVID-19 curbs after no new COVID-19 deaths were reported. China's crude oil imports from Russia in November rose 17% year on year as Chinese refiners rushed to secure more cargoes ahead of a price cap imposed by the Group of Seven nations and an EU embargo from Dec. 5. Markets also awaited clarity on when the Keystone pipeline, a major artery ferrying Canadian crude to the United States, would restart after TC Energy said it had removed the ruptured segment of the pipeline that caused an oil spill earlier this month and sent it for metallurgical testing as directed by U.S. regulators. WTI for February (new front month) delivery gained $2.06 per barrel, or 2.70% to $78.29, while Brent Crude for February delivery gained $2.21 per barrel, or 2.76% to $82.20. RBOB Gasoline for January delivery gained 3.30 cents per gallon, or 1.48% to $2.2558, ULSD for January delivery gained 8.06 cents per gallon, or 2.63% to $3.1395.

Technical Analysis: Traders remain focused on a winter storm stretching across the U.S; which is expected to bring heavy snow and curtail holiday travel season. Flight delays, cancellations and impassable roads during one of the busiest travel periods of the year could drive down fuel demand. They are also keeping an eye on surging COVID-19 cases in China, which could limit gains for oil prices. We would look for the 10-day moving average to provide a level of support, with breaks below this technical indicator allowing for a push toward $75. Support below this level rests at $73.71. On the upside, resistance can be found at $79.33, $80.38 and $82.14.

Fundamental NewsThe EIA reported that U.S. crude oil in the SPR fell by 3.6 million barrels in the week ending December 16th to 378.6 million barrels, its lowest since December 1983.

TC Energy said that it had safely removed the ruptured segment of Keystone pipeline that caused an oil spill earlier this month and sent it for metallurgical testing as directed by U.S. regulators. TC Energy Corp had submitted its plan to restart the Keystone pipeline to the U.S. Pipeline and Hazardous Materials Safety Administration nearly two weeks after the line ruptured in the worst oil spill in the United States in nine years. Even though a cleanup will take weeks or months, the line can still restart once it is repaired and the plan approved by the regulator. Parts of the pipeline carrying oil from Alberta, Canada, to refineries in Illinois opened last week at reduced capacity.

IIR Energy reported that U.S. oil refiners are expected to shut in about 282,000 bpd of capacity in the week ending December 23rd, increasing available refining capacity by 316,000 bpd. Offline capacity is expected to fall to 73,000 bpd in the week ending December 30th.

 Platts is reporting that the recent blizzard that left more than a foot of snow in some parts of North Dakota has impacted crude oil production by shutting in some 300,000 b/d and 400,000 b/d according to state officials. With below zero temperatures expected across the state and expected reduced staffing over the Christmas holiday period, officials do not expect to see a major bounce back in production to normal levels of 1 million b/d until after the New Year.

Early Market Call - as of 8:55 AM EDT

WTI - February $78.75, up 46 cents

RBOB - January $2.2675, up 1.17 cents

HO - January $2.1620, up 2.25 cents

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