Column: Depleted US Oil Inventories Support Oil Prices

Oil storage tanks are seen at sunrise with the Rocky Mountains and downtown Denver skyline in the background, October 14, 2014. REUTERS / Rick Wilking

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LONDON, Dec. 16 (Reuters) – Oil stocks in the United States are well below their normal seasonal level and have continued to decline in recent weeks, supporting oil prices despite fears over Omicron’s impact on the economy and travel.

Major statistical agencies are all predicting that the global oil market will run into surplus from this month or next, but stocks will start building up from an unusually low level, which should not put pressure on us. the drop in prices.

Total US inventories of crude and commodities outside the Strategic Petroleum Reserve are at the lowest seasonal level since 2014, according to weekly data from the US Energy Information Administration.

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US inventories are 79 million barrels (6%) below the five-year seasonal average for 2016-2020 and 59 million barrels (5%) below the pre-pandemic average for 2015-2019 (“Weekly oil status report “, EIA, Dec. 15).

The deficit from the five-year average has been between the 84th and 88th percentiles for all weeks since 1995, depending on whether the pandemic year is included or excluded, showing that stocks are relatively tight.

Commercial crude stocks are 26 million barrels (6%) below the five-year pre-pandemic average and the lowest seasonal level since 2014.

(Notebook :

Gasoline stocks are 10 million barrels (4%) below the pre-pandemic five-year average, also the lowest seasonal level since 2014.

Recent weekly reports show that crude and gasoline inventories remain under pressure, with no signs of rebuilding to eliminate deficits.

Brent prices have stabilized near or slightly above the long-term average in real terms, and the futures market has remained in tail, despite the resurgence of coronavirus infections and new travel restrictions.

The spread of US crude futures has been even stronger, and there are many more bullish hedge fund positions in the WTI contract, likely reflecting the low level of domestic stocks.

Even the promised exit of 50 million barrels of crude from the Strategic Petroleum Reserve (18 million barrels of accelerated sales and 32 million barrels of loans to be replaced) hasn’t changed that outlook much.

Given the current depletion of stocks, the market is likely to absorb both strategic sales and increased production from OPEC + and US shale producers.

The main source of uncertainty stems from the new wave of the coronavirus pandemic and the associated restrictions on international travel and domestic business activities.

The new wave is likely to delay the resumption of international passenger aviation from the first quarter to the second, when the build-up of immunity and seasonal changes are expected to help reduce transmission of the virus.

John Kemp is a market analyst at Reuters. The opinions expressed are his own.

Associated columns:

– Bullish oil outlook crushed by rising coronavirus cases (Reuters, December 9) read more

– Oil positions and prices have returned to neutrality after the lightning crash triggered by Omicron (Reuters, November 30) read more

– No shock and wonder after emergency US oil release (Reuters, November 24) read more

– Seasonal weakness could push oil prices down a bit (Reuters, November 11) read more

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Editing by Elaine Hardcastle

Our standards: Thomson Reuters Trust Principles.

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