Crude oil inventories in the United States rose this week by 483,000 barrels for the week ending January 12, according to The American Petroleum Institute (API), after analysts predicted a draw of 2.4 million barrels. The API reported a 5.215-million-barrel draw in crude inventories in the week prior. On Tuesday, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) rose by 0.6 million barrels again this week. Inventories are now at 355.6 million barrels.Oil prices were mixed ahead of the API data release. At 4:20 pm ET, Brent crude was trading down 0.26% at $78.09—but up $0.67 per barrel compared to where it was this same time last week. The U.S. benchmark WTI was trading up on the day by 0.59% at $72.83, up $0.76 per barrel compared to this time last week. Gasoline inventories saw another large build this week, rising by 4.86 million barrels after rising by 4.896 million barrels in the week prior. As of last week, gasoline inventories are now about 1% above the five-year average for this time of year, according to EIA data. Distillate inventories also rose this week, by 5.21 million barrels, after rising by 6.873 million barrels in the week prior. Distillates are roughly 4% below the five-year average.
OPEC leaves oil demand for 2024 unchanged
The Organization of the Petroleum Exporting Countries (OPEC) decided to leave the global oil demand forecast for 2024 unchanged at 2.2 million barrels per day (bpd), the group’s January report showed on Wednesday. The oil demand is expected to see growth of 1.8 million bpd next year.Positive economic, manufacturing, and services sector activity is expected to further support China’s economic recovery this year, thus putting Beijing as the key driver of demand growth in the next 12 months. In 2025, demand for all oil products is projected to “fully” recover to its pre-pandemic levels. Total world oil demand is anticipated to reach 104.4 million bpd, supported by strong air travel demand, healthy road mobility, industrial construction, and agricultural activities in non-OECD countries, putting the region’s demand at 2 million bpd in 2024 and 1.7 million bpd in 2025. Demand in OECD countries is expected to grow by 300,000 bpd this year, and by 100,000 in 2025. r NN: Its up how far Iran w.ants to push things. I think pretty far
Citi Cuts Brent Oil Price Forecast to $74 in 2024 on Ample Supply
Brent Crude oil prices are expected to average $74 per barrel this year, Citi said in a note, revising down its previous forecast by $1 a barrel, due to expectations of excess supply. The researchers at the bank also slashed their Brent forecast for 2025 by $10 per barrel, and now see the international benchmark averaging $60 a barrel next year. “We believe softer market fundamentals, absent major supply disruptions, will result in OPEC+ rolling over its Q1 2024 production cuts throughout the whole 2024 and start tapering them only in H2 2025,” Citi’s analysts wrote in a note carried by Reuters. Due to the OPEC supply management, Brent prices are likely to hold above $70 a barrel this year, as the cartel and its partners in the OPEC+ alliance are expected to keep the market “finely balanced,” according to Citi. The analysts, however, warned that the rising tensions in the Red Sea and the Gulf of Oman could lead to a spike in the risk premium in oil prices in the short term. Barring a major geopolitical escalation resulting in a large supply outage—which cannot be discounted—, oil prices are unlikely to reach $100 a barrel in 2024 as American oil production and exports are rising faster and higher than expected, and market sentiment about demand is downbeat, especially for the first half of 2024. Expected weak global economic growth would slow oil demand growth in 2024, keeping the average U.S. benchmark WTI Crude oil price below $80 per barrel, according to the monthly Reuters poll at end-December, in which analysts revised down their forecasts for 2024 from the previous month’s projections. Brent Crude prices are now expected to average $82.56 per barrel this year, down from the $84.43 consensus forecast in the November poll. In the December Reuters survey, only one of 34 contributors said they expected the average Brent Crude prices to be above $90 per barrel in 2024
Hooties vow to continue attacks
The Houthis vowed to continue to attack ships in the Red Sea. The United States and the United Kingdom, with support from Australia, the Netherlands, Canada, and Bahrain, carried out airstrikes on the Houthis on January 11. “The American and British enemy bears full responsibility for its criminal aggression against our Yemeni people, and it will not go unanswered and unpunished,” a Houthi spokesperson said. The Houthis have carried out 27 attacks on commercial ships in the Red Sea since October. “The Iran-backed Houthis pose a serious threat to shipping and they must be deterred from further attacks. The Houthis have acted with impunity, attacking more than two dozen ships over a period of two months. The U.S. and UK airstrikes are an important first response. Iran is using the Houthis as a proxy, encouraging their drone and missile attacks. It is essential that Iran be held accountable for its support of the Houthis.” — Seth J. Frantzman, FDD Adjunct Fellow “Degrading Houthi long-range strike capabilities in a one-off strike or sporadic series of attacks is one thing, but signaling an intent to mete out punishment over time if Houthi maritime harassment continues is another. Currently, the Houthis and their patron in Tehran have no incentive to believe this strike was not a copy-paste from Biden of his Iraq and Syria retaliation, which also failed to restore deterrence.” — Behnam Ben Taleblu, FDD Senior Fellow “After October 7, the Houthis attempted and failed to mount a successful attack against southern Israel. Consequently, they altered their strategy and began targeting international shipping companies in the Red Sea, aiming to exert pressure on the international community to halt the Gaza conflict. However, this approach may be flawed, since it inadvertently prompted the United States and other global powers to retaliate by targeting Houthi assets in Yemen.” — Joe Truzman, Senior Research Analyst at FDD’s Long War Journal The U.S. and UK airstrikes on the Houthis on January 11 came as a counterattack to two months of Houthi assaults on shipping in the Red Sea. “These strikes are in direct response to unprecedented Houthi attacks against international maritime vessels in the Red Sea—including the use of anti-ship ballistic missiles for the first time in history,” the White House said in a statement. The 27 Houthi attacks on shipping have affected more than 50 countries. “More than 2,000 ships have been forced to divert thousands of miles to avoid the Red Sea—which can cause weeks of delays in product shipping times,” the statement noted. The Houthis support Hamas and claim their attacks are in response to the war in Gaza. The first Houthi attack occurred on October 19, when the Houthis launched cruise missiles and drones targeting Israel. A U.S. Navy warship in the Red Sea intercepted the attack. The Houthis continued their attacks in late October and expanded their assaults, hijacking a ship in November and vowing to blockade all ships linked to Israel transiting the Red Sea.
Chronology of event
“Iran Seizes Oil Tanker Off Coast of Oman,”
“U.S., UK Shoot Down Largest Houthi Missile and Drone Barrage in Red Sea,”
“China’s Largest Shipping Company Suspends Transports to Israel Due to Houthi Attacks,”
US confirms new strikes on Houthis in Yemen
United States Central Command (CENTCOM) confirmed that the US forces carried out another airstrike on Houthi targets in Yemen on January 13. “This strike was conducted by the USS Carney (DDG 64) using Tomahawk Land Attack Missiles and was a follow-on action on a specific military target associated with strikes taken on Jan. 12 designed to degrade the Houthi’s ability to attack maritime vessels, including commercial vessels,” CENTCOM said in a statement. The military also confirmed that the latest attack targeted a Houthi radar site in Yemen.
Oil jumps by over 3.5% amid Red Sea tensions
Oil jumped as the US and allies launched airstrikes against Houthi rebels in Yemen, stepping up retaliation for attacks on ships in the Red Sea that have imperiled flows of fuel and goods through the vital waterway. President Joe Biden said strikes had been successfully conducted against a number of targets used by the Iranian-backed group, with US officials saying radar sites and missile launchers were hit. Global benchmark Brent crude rose as much 2.5% to above $79 a barrel as investors attempted to gauge the likelihood of whether the strikes will spark a broader conflict in the Middle East. The Houthis had launched their largest assault to date on shipping in the Red Sea earlier this week, despite the presence of a US-led naval force. That prompted warnings of retaliation from Washington. Iran also seized a tanker off the coast of Oman on Thursday, further inflaming the situation. The US-led strikes mark an escalation of tensions in the Middle East that have been rising since the Hamas attack on Israel in early October. The Houthis have been firing missiles at ships on an almost-daily basis over the past two months, and have vowed not to let up until Israel ends its assault on Gaza. The major danger for prices is if Iran is drawn directly into the conflict, which could threaten output and flows in a region that produces a third of the world’s crude. That’s reintroducing a war-risk premium to the market, which had been weakening due to rising non OPEC+ supply and slowing demand growth. “A ratcheting up in the conflict suggests a greater potential for disruptions, and the need for vessels to divert,” aiding prices, said Warren Patterson, head of commodities strategy at ING Groep NV. “However, the bigger risk is if this spreads and we start to see threats to flows coming out of the Persian Gulf. While we believe the risk of this is low, the impact would be significant.”President Biden left open the possibility of additional moves against the Houthis. “I will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary,” he said. The airstrikes are a gamble for the US and the UK, which have repeatedly said a priority amid the Israel-Hamas fighting is to keep it from spreading. There are concerns from Saudi Arabia and nations that such action will inflame tensions, and after the US-led action, Riyadh issued a call for restraint. The Houthi assaults in the Red Sea have prompted many commercial shippers to direct vessels around the southern tip of Africa, rather than risk a passage through the waterway that links to the Suez Canal. That’s increased costs. Ahead of the strikes, Citigroup Inc. estimated that geopolitical risks in the Middle East had added $2 to $3 barrel to Brent, and said the premium may increase substantially if supply disruptions expanded. Standard Chartered Plc, meanwhile, has said oil was underpriced by at least $10.
Brent’s prompt spread — the difference between its two nearest contracts and a key metric — signaled tighter near-term conditions. The gap was 37 cents a barrel in backwardation, up from 3 cents on the first trading day of the year. “The fluctuations in prices will absolutely remain in place as the situation develops,” said Vandana Hari, founder of consultancy Vanda Insights. “It’s an uneven tug-of-war between a bearish outlook on fundamentals and a supportive Mideast risk premium. As of now, both can be expected to remain in play.”
Oil Prices Surge Following Oil Tanker Hijacking in Gulf of Oman
Tensions in the Middle Eastern shipping lanes continued to run high on Thursday amid reports of a hijacked oil tanker in the Gulf of Oman, which was boarded by masked individuals and forced to alter course toward Iran. The UK Marine Trade Operations (UKMTO) said on Thursday that it had received a report of a vessel being boarded by 4-5 armed unauthorized persons in an area east of Sohar, Oman. “Unauthorised boarders are reported to be wearing military style black uniforms with black masks,” the UKMTO said. The ship “has altered course towards Iranian territorial waters and communications with the vessel have been lost,” the UK authority said. According to TankerTrackers.com, the oil tanker “which the Iranians have boarded today in the Gulf of Oman is the ST NIKOLAS”, which is carrying Iraqi oil. Formerly known as the SUEZ RAJAN, the tanker was previously seized by the U.S. government after being found to transport a million barrels of Iranian oil in connection to a U.S. company, TankerTrackers.com noted. At the time of the incident, the vessel was traveling to the Turkish port of Aliaga after loading crude from the Iraqi Basrah Oil Terminal. A spokesperson for Empire Navigation, the company managing the St. Nikolas, told CNBC that it lost contact with the vessel on Thursday, but could not confirm an unauthorized boarding. It was not immediately clear who boarded the oil tanker, but the latest incident shows that tensions in the waters in the Middle East are escalating. Early on Thursday, oil prices rose by nearly 2% amid intensified attacks on commercial shipping in the Red Sea this week. On Wednesday, Israel stepped up its attacks on Gaza and the Yemeni Houthis carried out what UK Defence Secretary Grant Shapps called the largest attack in the area yet. Per media reports citing U.S. Central Command, the U.S. and UK forces in the Red Sea shot down 21 drones and missiles on Tuesday alone. NN: the shit is hitting the fan!
Middle East Escalation Pushes Oil Prices Higher
A fresh escalation of violence in the Middle East pushed oil prices higher early on Thursday, even after Wednesday’s session ended with losses for both WTI and Brent. Those losses were driven by an unexpected build in U.S. crude oil inventories and another round of substantial builds in fuel inventories. However, also on Wednesday Israel stepped up its attacks on Gaza and the Yemeni Houthis carried out what UK Defence Secretary Grant Shapps called the largest attack in the area yet. Per media reports citing U.S. Central Command, the U.S. and UK forces in the Red Sea shot down 21 drones and missiles on Tuesday. The Houthis’ military spokesman, Yahya Saree, said they had attacked a U.S. military ship because it was “providing support” to Israel. “Oil prices seem to be in a state of indecision this week, as market participants attempt to digest a confluence of factors,” IG analyst Yeap Jun Rong told Reuters. “It’s an uneven tug-of-war between a bearish global oil demand-supply outlook and a supportive, albeit fleeting, risk premium from the Red Sea attacks and tensions,” Vandana Hari from Vanda Insights told Bloomberg. “Sentiment appears more predisposed to panicky selling than protective buying.” The news outlet reported that the Houthi attacks had reduced the number of tankers passing through the Bab el-Mandeb strait off the coast of Yemen by a third. This must be a very recent development, however, since Reuters reported earlier this week that in December there was no palpable change in tanker movements in the area. “We haven’t really seen the interruption to tanker traffic that everyone was expecting,” Lloyd’s List shipping analyst Michelle Wiese Bockmann told Reuters. The Houthis have not targeted tankers so far. Yet the danger of this changing prompted some oil traders such as BP and Equinor to reroute their vessels away from the Red Sea.
UK investigates ship incident near Oman….. Shapps does not rule out attacking Houthis on land
United Kingdom Maritime Trade Operations (UKMTO) said on Thursday that it was notified of a ship incident near the coast of Oman. “UKMTO has received a report of an incident approximately 50NM [nautical miles] East of Sohar, Oman” the institution explained on its X account, adding that officials are currently inspecting the details surrounding the incident. Additionally, all the vessels were advised to navigate the area “with caution and report any suspicious activity to UKMTO.” Recently, Yemen’s Houthi rebels claimed launching an attack on a warship with the United States flag in the Red Sea.
UK: Armed people aboard ship near Oman
United Kingdom Maritime Trade Operations (UKMTO) reported on Thursday that between four to five armed people burst in aboard the vessel near the Oman coast. “Unauthorized boarders are reported to be wearing military style black uniforms with black masks,” the organization said on its official X account, adding that officials remain attentive to clarify details on the trespassing. Additionally, minutes earlier it was noted that communication with the vessel was interrupted after hearing “unknown voices over the phone along with the Masters’ voice.”
Shapps does not rule out attacking Houthis on land
British Defense Secretary Grant Shapps issued another warning on Wednesday to Houthis regarding their attacks on ships in the Red Sea. Earlier today, the United Kingdom and the United States repelled the “largest attack” by the Yemeni group in the area to date, which included drones and missiles. Shapps said that “enough is enough” and that these incidents “cannot continue,” refusing to rule out the possibility of launching strikes on Houthi targets on land. He repeated that there is “no doubt whatsoever that the Iranians are heavily behind” the Houthis, providing military equipment and funding as well as intelligence, surveillance and reconnaissance.
Oil Slides on Large Builds in Fuel Inventories
Crude oil prices moved lower today after the U.S. Energy Information Administration estimated a relatively moderate inventory build in crude all and also reported sizeable increases in fuels for the first week of 2024. In crude, the EIA reported an increase of 1.3 million barrels At 432.4 million barrels, inventories are about 2% below the five-year average for this time of the year. The weekly change compared with a decline of 5.5 million barrels for the last week of 2023. A day before the EIA report was released, the American Petroleum Institute estimated a larger than expected decline in inventories, prompting a gain for oil prices. The effect was reinforced by the EIA’s latest Short-Term Energy Outlook that projected oil demand will exceed supply by 120,000 bpd this year. In fuels, meanwhile, the authority reported inventory builds for the first week of January. In gasoline, the EIA estimated an inventory increase of 8 million barrels, which compared with a massive build of 10.9 million barrels for the final week of 2023. Gasoline production averaged 9.7 million barrels in the first week of January, which compared with 8.8 million bpd for the previous week. In middle distillates, the EIA estimated an inventory build of 6.5 million barrels for the first week of the new year. This compared with an increase of 10.1 million barrels for the final week of 2023. Middle distillate production averaged 5.2 million barrels daily, which compared with 5.1 million barrels daily for the previous week. Oil prices, meanwhile, remain stuck between oversupply perceptions and Middle Eastern supply disruption risk. Saudi Arabia’s announcement of deeper than expected price cuts for February cargos led to a surge in bearish sentiment but short bets were limited by caution with regard to the situation in the Red Sea. There, Houthi attacks on ships continue despite the ramped-up military presence of U.S. and UK forces. In the latest update from the region U.S. Central Command said it and UK forces had shot down more than 20 drones and missiles released by the Houthis.