Crude oil inventories increased 0.6 MMBbl last week according to the EIA. Gasoline and distillate inventories decreased by 1.6 MMBbl and 1.9 MMBbl respectively. Total petroleum inventories posted a substantial decline of 12.9 MMBbl. The increase in crude oil inventories was higher than analyst expectations, which sent a bearish signal to the market. However, the build in crude oil was more than offset by the refined product withdrawals, which led to a neutral environment for trade during the lighter volume holiday trade.
WTI traded within a $1.34/Bbl range last week and stayed well within the $50-$55/Bbl range that has been established since OPEC agreed on quotas at the end of November. Due to the light trade heading into the new year, there was no significant changes to trader’s positions according to the most recent CFTC report. Market participants continue to wait for fundamental data (expected later this month) to understand whether the OPEC and non-OPEC producer quotas are being properly enforced. This data will be the key to breaking out of the current range. If data seems to confirm the production cuts, prices will continue their march up towards the $60/Bbl mark. Any data that could suggesting non-compliance, on the other hand, could push prices back to the high $40/Bbl level. Until the data is available, Drillinginfo expects the WTI price range to remain intact.
NATURAL GAS
Natural gas production increased 1.3 Bcf/d last week to 71.8 Bcf.d as some of the freeze-off losses returned with the warmer temperatures. The warmer weather also reduced the need for Canadian supplies as they dropped 800 MMcf/day compared with the week before.
On the demand side, the warmer temperatures pushed Res/com demand down 11.3 Bcf/day and pushed power demand down another 6.3 Bcf/day week-on-week. Demand should rebound in the coming week as temperatures are expected to decline significantly. Cold weather levels similar to those endured in the 3rd week of December are expected to return in the coming 6-10 day period. In the 11+ day period, forecasts are currently calling for warmer temps. This type of back and forth temperature pattern is consistent with a weak to non-existent La Nina pattern.
The storage report last week was a little above expectations at a 237 Bcf withdrawal. This week’s storage report is expected to be relatively weak (either side...
