WTI futures hover near four-month high after EIA report, global demand outlook

West Texas Intermediate crude held near its recently hit four-month high after the Energy Information Administration reported a fifth consecutive weekly decline in US distillate fuel inventories, albeit smaller than expected, and as inventories at Cushing, Oklahoma, slid for a second week. An upward revision to global demand growth this year and in 2015 and a downward revision to domestic crude output continued to support the market. Unexpectedly upbeat trade data from China and crude imports hitting a record high also helped lift prices.

On the New York Mercantile Exchange, WTI crude for delivery in March traded at $101.32 per barrel at 15:47 GMT, up 1.38% on the day. Prices rose earlier to a four-month high of $101.38 a barrel, while days low stood at $101.18 a barrel. The US benchmark fell by 0.1% on Tuesday, its first decline in six days, but is up 1.2% on weekly basis so far.

Meanwhile on the ICE, Brent futures for settlement in April added 0.64% to trade at $108.87 per barrel after shifting in a daily range between $109.00 and 108.08 a barrel. The European benchmark added less than 0.1% on Tuesday and further trimmed its weekly decline on Wednesday.

US crude remained near four-month high levels after the Energy Information Administration reported a fifth consecutive decline in US distillate inventories, a closely watched category during the winter season. Supplies, which include diesel and heating oil, fell by 0.73 million barrels to 113.1 million in the seven days through February 7th, trailing the median estimate of 10 analysts surveyed by Bloomberg for a 2.13-million drop, but remained well below the average range for this time of the year.

US crude inventories rose by 3.3 million barrels last week to 361.4 million, compared to expectations for 2.6-million increase. However, supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, plunged to 37.6 million barrels from 40.3 million a week earlier.

Motor gasoline inventories slid by 1.9 million barrels, the EIA said, outperforming expectations for a minor decrease of 100 000 barrels.

Both gasoline and distillate fuel production jumped last week, averaging 8.9 million and 4.6 million barrels per day, respectively. Refineries utilization rate gained to 87.1%, up from 86.1% the preceding period.

US crude imports rose to 7.9 million barrels per day in the seven days to February 7th, up by 1.0 million bpd from the previous week. Over the last four weeks, imports averaged 7.6 million barrels per day, 1.5% below the same four-week period last year.

Demand outlook

Also supporting the oil complex, the Energy Information Administration raised its global demand growth forecast, while also trimming its projections for US crude output in the next two years. The government agency cut its domestic crude production forecast for 2014 by 100 000 barrels per day to 8.4 million and by another 100 000 bpd to 9.2 million in 2015.

Meanwhile, the EIA revised up its forecast for world demand growth by 50 000 bpd to 1.26 million bpd in 2014, reflecting the global economy’s recovery state.

EIAs upward revision was backed by OPEC as the group also predicted a larger demand growth this year compared to its previous estimate. The Organization of the Petroleum Exporting Countries said in its monthly report that global demand will rise by 1.09 million barrels per day in 2014, 40 000 bpd above its previous estimate and sighted a possibility for further improvements.

The group expects contraction in European demand to ease in 2014, while preliminary data from the last two months signaled strong consumption levels in the US.

“Given the improvement in OECD oil demand, the likelihood for upward adjustments for world oil demand growth in 2014 is currently higher than existing projections,” OPECs report stated. “For the non-OECD countries, risks are skewed to the downside due to fiscal and monetary issues.”

The report also showed that OPEC production rose to 29.71 million barrels per day last month due to a partial recovery in Libyas crippled output, while Saudi Arabias production was reduced.

China trade data

Surprisingly upbeat China trade data and crude imports hitting a record level also offered the oil complex support. Offsetting some previous week data points from the world’s second largest economy and oil consumer, China’s exports and imports exceeded sharply analysts’ estimates, confounding projections for a decline in both figures.

The Asian nation’s exports surged by 10.6% in January, beating expectations for a minor 2.0% increase from December’s 4.3% growth. Meanwhile, imports soared 10.0% last month, defying expectations for a drop to an expansion of 3% after scoring 8.3% in December. As a result, China’s trade surplus jumped to $31.86 billion, outperforming forecasts to narrow to $23.65 billion from December’s $25.60 billion.

Moreover, the Asian country’s crude imports hit a record in January, mainly due to the commissioning of the 300 000-bpd Sichuan refinery and the 280 000-bpd Fujian refinery, and the startup of a new petroleum reserve cite at Huangdao. China’s inbound shipments of crude jumped by 11.9% in January from a year earlier, reaching a record 6.63 million barrels per day, the nation’s customs agency reported.