Crude Oil & Natural Gas Climb On Increased Cold Weather Demand

Crude oil continued to climb this morning after Thursday’s EIA inventory report showed a significant drop in heating oil and distillates. Crude oil added 23 points to trade at 97.56 while Brent oil added 11 cents to sell at 107.70. The Department of Energy’s (DoE) weekly petroleum stockpiles report, delayed by a day by a US holiday Monday, showed a significant drawdown in distillate fuel as severe winter weather gripped North America. Distillate fuel, which includes heating oil and diesel, fell 3.2 million barrels in the week ended January 17, the report said. The plunge surprised analysts, who on average forecast a decline of 800,000 barrels. S crude-oil supplies however rose for the first time in eight weeks, the DoE said, but the increase of one million barrels was in line with expectations. The report said the underwhelming impact of the opening of the Southern US leg of the controversial Keystone XL pipeline was putting pressure on prices. The $2.3 billion pipeline on Wednesday started carrying crude 785 kilometers from Cushing in Oklahoma to Gulf Coast refineries in the southern state of Texas. The International Energy Agency in its monthly report projected demand for crude would grow 1.3 million barrels per day in 2014, up from a previously forecast increase of 1.2 million. It said consumption accelerated at the end of 2013 as advanced economies, led by the United States, saw growth pick up.

 

That came as the International Monetary Fund raised its global growth forecast for the first time in nearly two years – predicting 3.7 percent expansion in 2014, up from its earlier 3.6 percent estimate. It grew three percent last year. The optimistic outlook was fueled by a solid recovery in the United States while other countries move away from austerity. Eyes are now on the US Fed, which last month said it would cut its bond-buying scheme by $10 billion a month to $75 billion as of January.

The oil market has had a “remarkable three years” in the words of BP CEO Bob Dudley, with prices stable at around $100 per barrel as supply disruption in North Africa and the Middle East was matched by an unexpected increase in production from the U.S.  However, analysts have flagged several factors that could disrupt this delicate equilibrium, including declining growth in energy demand, sabotage in Nigeria and the lifting of sanctions on Iran.

inventories fell only modestly last week, but traders look forward. Natural gas is trading at 4.884 adding 64 pips this morning as weather turned colder overnight. Natural gas was trading on Thursday up to 2 percent to $4.77 after the Energy Information Administration reported that operators withdrew 107 billion cubic feet from storage last week, close to analyst estimates that ranged from 95 to 110 bcf. However, the withdrawal was well below last year’s draw of 172 bcf, and the five-year average draw of 206 bcf.