Oil Prices Advance as US Inventory Report Fuels Optimism
New York, February 17, 2023 – Oil prices rose on Thursday, buoyed by the latest US crude oil inventory report and ongoing uncertainty surrounding the Russia-Ukraine conflict.
Brent crude futures for April delivery climbed 0.58% to $76.48 per barrel, while the US benchmark West Texas Intermediate (WTI) crude for March delivery, expiring on Thursday, gained 0.44% to $72.57 per barrel.
US Oil Inventory Report Surprises
According to data released on Thursday by the US Energy Information Administration (EIA), commercial crude oil inventories in the United States increased more than expected last week. During the week ending February 14, inventories rose by 4.6 million barrels, exceeding analysts’ median expectation of a 3 million barrel increase, as surveyed by Bloomberg.
"We did see a build in the crude oil inventories," Phil Flynn of Price Futures Group told AFP. "That is probably due to the fact that we have had some cold weather refinery problems."
Theoretically, an increase in inventories could weigh on crude prices, but "the key takeaway" from the report was "a very strong demand picture," Flynn noted. Distillate fuel deliveries in the United States, a proxy for demand, surged by 18.43% week-over-week. This category includes diesel, a widely used fuel for transportation and heating.
Ukraine Conflict in Focus
Market participants continue to monitor the ongoing talks surrounding the conflict in Ukraine. Concerns about potential supply disruptions and the impact on global energy markets have kept oil prices elevated. The United States and its allies have imposed sanctions on Russia, including restrictions on its energy exports.
Russia is a major oil producer and exporter, and any significant reduction in its supply could lead to higher prices worldwide. The uncertainty surrounding the conflict and the potential for further sanctions have added to the volatility in the oil market.
Demand Outlook Remains Positive
Despite the increase in inventories, analysts remain optimistic about the demand outlook for oil. The global economy is expected to continue to recover from the COVID-19 pandemic, driving up energy consumption.
"The demand side of the equation is still very strong," said Andy Lipow of Lipow Oil Associates. "We are still seeing a lot of economic activity."
Outlook for Oil Prices
Oil prices are likely to remain volatile in the near term, driven by a combination of factors, including the supply-demand balance, geopolitical risks, and economic conditions.
"The oil market is still very much in a news-driven environment," said Giovanni Staunovo, commodity analyst at UBS. "Any headline on the conflict in Ukraine or on the demand side can move prices."
Analysts expect oil prices to trade within a range over the coming weeks, with Brent hovering around $75-$85 per barrel and WTI in the $70-$80 per barrel region. The market will continue to monitor the situation in Ukraine, inventory data, and economic indicators for cues on the future direction of prices.
