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Oil Tops $120 on Blowout U.S. Consumption, Russia Supply Scare 

Commodities Mar 23, 2022 03:15PM ET
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By Barani Krishnan

Investing.com -- Oil breached $120 a barrel on Wednesday after U.S. government data showed weekly consumption far beyond market estimates, while major producer Russia continued to cite outages on the Caspian pipeline that played on the nerves of traders.

London-traded Brent, the global benchmark for oil, settled up $6.12, or 5.3%, at $121.60. Supply scares had already pushed Brent up by a net 7% in the past two sessions, giving it a week-to-date gain of 13% that would be its biggest since the 20% rally during the week that marked the start of Russia’s invasion of Ukraine.

U.S. crude’s West Texas Intermediate, or WTI, benchmark settled up $5.66, or 5.2%, at $114.93. WTI was up about 9% on the week.

Wednesday’s rally came after data from the U.S. Energy Information Administration's larger-than-expected drawdowns in crude, gasoline and distillate stockpiles.

In Russia, Energy Minister Alexander Novak reiterated the caution from a day ago that oil supplies by the Caspian Pipeline Consortium, which ships around 1.2 million barrels per day of Kazakh and Russian oil combined, may be completely stopped for up to two months due to storm-damaged berths on the Black Sea terminal.

In a throwaway to oil bulls, Novak also said he was unaware of any member of OPEC+ — the 23-member oil producing alliance jointly shepherded by Saudi Arabia and Russia — with plans to raise output beyond quotas set by the group to ensure its monthly exports growth doesn’t exceed 400,000 barrels per day. 

There had been talk earlier this month that the United Arab Emirates — the only OPEC+ producer other than Saudi Arabia with the capacity to add meaningfully to output — might export beyond its quota to alleviate the global tightness in crude supply. But Saudi disapproval, implied rather than expressed, had quickly dissuaded the Emirates from doing anything to disrupt OPEC+ harmony in sticking together as a group and milking the most out of oil prices.

“It’s OPEC+’s version of the ‘maximum pain strategy’, aimed at consuming countries,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. 

US crude stockpiles fell by 2.51 million barrels last week, after a build of 4.35 million reported during the prior week to March 11. Analysts tracked by Investing.com had expected crude inventories to continue rising in the week to March 18, by some 144,000 barrels on average.

On the gasoline inventory front, a drawdown of 2.95 million barrels added to the 3.62 million run down in the week prior. Analysts had forecast a gasoline consumption of 1.99 million barrels on the average for last week. Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product, seeing drawdowns for seven straight weeks now.

With distillate stockpiles, the drawdown was 2.07 million barrels versus the previous week’s build of 332,000. Analysts had estimated a distillates drop of 1.39 million barrels during the week to March 18. Distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, have been the strongest growth component of the US oil complex for months, seeing virtually non-stop inventory declines since mid-January.

Oil Tops $120 on Blowout U.S. Consumption, Russia Supply Scare 
 

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Comments (11)
Mark McMillan
Mark McMillan Mar 24, 2022 11:13AM ET
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Brian would how do you feel articles like the following from Yahoo affect oil prices? "The world has less than 10 years to avert climate change catastrophe, report finds  Ben Adler." from Yahoo
Andrew Ulferts
Andrew Ulferts Mar 23, 2022 5:43PM ET
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How about that SPR release too? 4.2 million bbls. Wow. We are burning through some reserves now. It appears they can no longer pretend there is a demand problem.
Barani Krishnan
Barani Krishnan Mar 23, 2022 5:43PM ET
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No one's really pretending we have demand problems, mate, when some 10 million barrels of daily regular supply has theoretically just vanished: 4.5 mln made up of non-Iranian OPEC+ supply; 2 mln (or so) of Iranian oil; and (now) 3 mln of Russian supply. Demand separately grew by 1-2 mln from pandemic lows. It'll be a miracle if you still don't get $100+ a barrel with these sort of disruptions, unintended or otherwise (by OPEC)
Josh Ray
Josh Ray Mar 23, 2022 2:56PM ET
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"slow clap" Biden doin the creator's work. Can't wait til he gets his just desserts :) whoa whoa whoa to those who dwell on the earth... dems say watch more abc NBC and def CNN 👌 "were goin green" steadily buying over priced oil from the Middle East 🤣 I fail to see how this is green or better than having gourmet own oil from the Alaskan pipeline.
Pwr Strk
Pwr Strk Mar 23, 2022 2:03PM ET
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Biden milking the working class as much as he can
Parvez Ansari
Parvez Ansari Mar 23, 2022 1:54PM ET
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the usa propaganda machine are not sparing even russian who doesn't have anything to do with war outside of russia. Shame on those who fuelling this hate
Dion Argueta
Dion Argueta Mar 23, 2022 1:46PM ET
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Buy oil company stock Call Options to get the most bang fotmr your buck!!!! 👍
Dream Big
Dream Big Mar 23, 2022 1:46PM ET
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If you're bullish on oil, you should rather buy pullback, we just had one at $100 a week ago, and not after a +7% in 2 days.
Ma Lu
Ma Lu Mar 23, 2022 1:44PM ET
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In the end one has to admit that it wasn't very clever to drop the renewable plan in favor of oil and gas
Kelly Mayer
Kelly Mayer Mar 23, 2022 1:44PM ET
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Unless it was intentional.
Josh Ray
Josh Ray Mar 23, 2022 1:44PM ET
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huh? we just shutdown our own oil line to buy it price gouged elsewhere.
DJ Ryte
DJ Ryte Mar 23, 2022 1:36PM ET
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Pump more American oil or OPEC will pump us from behind
Show previous replies (1)
Barani Krishnan
Barani Krishnan Mar 23, 2022 1:36PM ET
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DJ Ryte, funny yes :) But we should also understand the need to transition into more energy efficiency. Fossil energy is the slowest component of the entire industry to adapt, no thanks to the super lobby put up by Big O
Josh Ray
Josh Ray Mar 23, 2022 1:36PM ET
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Barani Krishnan you sound like CNN
Barani Krishnan
Barani Krishnan Mar 23, 2022 1:36PM ET
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Josh Ray   That's my personal opinion. And if it happens to coincide with what CNN says, then be it.
Barani Krishnan
Barani Krishnan Mar 23, 2022 1:36PM ET
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ben sc  There is such a thing as economies of scale. It varies from industry to industry and it is the "price", for the lack of a better word, that you pay for making innovation work. Are you trying to say that we should have NEVER moved on from carburetor-fired engines to fuel-injection types? Did you model the efficiency on that and what results did you get? Do people even talk about such comparisons these days? I'll tell you why they don't: It's because the world has moved on and embraced the new tech. Likewise, in the case of the Prius and, now, the EVs. When you make everything political because it's fashionable to do so, the thing that loses is innovation. Understand that before anything else. Innovation is the reason why central banks are slowly and surely moving towards CBDCs despite their general aversion to Bitcoin.
Rodney Jensen
Rodney Jensen Mar 23, 2022 1:36PM ET
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Go Brandon
Umesh Yadav
Umesh Yadav Mar 23, 2022 1:22PM ET
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Umesh Yadav
Umesh Yadav Mar 23, 2022 1:22PM ET
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hello
 
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