U.S. Refinery Maintenance Season: U.S. oil refinery turnaround/maintenance season is around the corner, and a handful are planning to shut in around 1.5 million barrels per day of refining capacity during the week ending February 14th. Seasonal maintenance shutdowns are quite common as refineries conduct regular turnarounds to ensure equipment is functioning properly and to perform necessary repairs or upgrades. The shutdowns will be spread across the various regions including East Coast, Gulf Coast, Midwest and West Coast. The number of refineries with plans to perform maintenance will increase as we move closer to March, April and May as many have a short window in spring and fall to perform their upgrades and maintenance (which results in temporary reduced run rates) to avoid supply disruptions during the summer driving season. Unfortunately, winter weather conditions are not conducive for refinery maintenance to take place in winter months in PADD 2 (Midwest) or PADD 4 (Rockies).
China Reducing Saudi Oil Purchases: Saudi Arabia's crude oil supply to China is expected to decline in March after Aramco hiked its prices by $2.40 to $3.90 per barrel, to the highest since December 2022. The price hike came after the latest U.S. sanctions widely targeting Russian energy trade disrupted Russian supply and boosted shipping costs. Data shows, Aramco will ship about 41 million barrels to China in March, down from 43.5 million barrels in February. Saudi Arabia is the number two crude supplier to China after Russia. China's crude imports from Saudi Arabia totaled 1.57 million barrels per day for 2024, down 8.5% from 2023.
U.S. Energy Stocks: API reported energy stocks were reported with a large crude build of 9 million barrels, a gasoline draw of 2.5 million barrels and a distillate draw of 590,000 barrels. The latest Reuters poll regarding the EIA stock report (released today at 9:30am CST) is showing expectations that crude inventories rose by 3.02 million barrels, projected gasoline stock rise of 1.4 million barrels and distillate stock draw of 1.6 million barrels. The rate of refinery utilization is estimated to have risen by 0.4% from 84.5% of total capacity.
Market Overview: Oil prices are lower this morning after data from the American Petroleum Institute (API) reported a 9 million barrel build in U.S. crude inventories. The latest poll of analysts showed an average expectation for a 3.02 million barrel build. Also, bearish news impacting markets are comments by Federal Reserve Chairman Jerome Powell stating that the economy is in a good place, therefore any possible interest rate cuts are likely to be pushed out further into 2025 than had been earlier projected. Traders will now turn to this morning's Weekly Petroleum Status Report from the EIA for confirmation.
WTI Daily Chart
The WTI market is very much being driven by headlines, as President Trump’s aggressive stance on Gaza, Israel, and Iran, along with oil production demands and U.S. tariffs, is heightening geopolitical instability. WTI was testing the 200 day moving average of $74.31, and if the market goes above $75.00 that could be the signal we could go much higher. The market is seen finding short term resistance at $74.84, the 62% retracement value with the second level of resistance at $75.00. Meanwhile, with the slight downward movement this morning, support is seen at $71.13, the 38% retracement level, with the 2nd level of support at $70.00.
Global oil prices fell for the first time in four days, down from two week highs on profit-taking after an increase was reported by the EIA of U.S. crude oil stocks (increase of 4 million barrels). Prices are also being pressured after reports that President Trump discussed the war in Ukraine in phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy. This action is likely taking some of the risk premium out of oil prices, at least for right now. With that, all three products dropped close to 3% with WTI dropping back down to settle at $71.37, Heating Oil futures fell by $0.0626 to $2.452 and RBOB dropped $0.0577 to $2.0896.
