Oil hits 7-week high on strong demand in China, OilPrice reports.
The start of the Lunar New Year in China has at last slashed the amount of news dealing with the Asian powerhouse’s 2023 demand increases and brought the United States back into the limelight. Torn between the urge to replenish SPRs and push WTI below $80 per barrel again, the weakness of US refining coupled with maintenance-heavy weeks ahead could become that rotten apple which spoils the barrel. US top officials said President Joe Biden would veto a Republican-sponsored bill that seeks to limit the president’s authority to tap into national strategic petroleum stocks, provided the bill passes the Congress.
A diesel price spike seems almost inevitable as middle distillate inventories in OECD Europe remain some 30 million barrels below the 5-year average and US diesel production is hamstrung by idled refining capacity. Just as Europe is bracing for the impact of the diesel ban, strikes began at three French refineries, curtailing supply of middle distillates and gasoline in the country at the worst possible time. Europe’s key diesel futures, the front-month ICE-gasoil contract, surpassed the $1,000 per metric tonne mark for the first time since November 2022, indicating that the diesel squeeze is on. U.S. softens tone on product price cap.U.S. Treasury Secretary Janet Yellen said the Price Cap coalition is working to come up with caps on Russian petroleum products, assumed to kick in on February 5, but the markets “are complicated and there’s a chance things would not go to plan”.
The latest EIA Short-Term Energy Outlook predicts that in 2023 Permian would still represent 80% of the US’ crude production growth of 540,000 b/d, however the shale superbasin’s annual increment is expected to shrink to 270,000 b/d in 2024. Freeport LNG claims it had completed repairs to the liquefaction facility and asked US regulators to partially resume operations, though the decision is still subject to a FERC safety review. Dutch authorities will stick to their pledge to shut Europe’s largest onshore gas field in Groningen by October due to recurrent earthquakes, denting the portfolio of JV partners Shell and ExxonMobil. Investors are roaming into the market again.Portfolio investors have added positions in the oil and product futures and options markets at the fastest rate in more than two years, purchasing an equivalent of 89 million barrels (most of it crude) in the week ending January 17.