Crude oil futures pushed to fresh 13-month highs Feb. 24 as the market shrugged off a US crude build amid tightened forward outlooks.
NYMEX April WTI settled up $1.55 at $63.22/b, and ICE April Brent climbed $1.67 to $67.04/b.
"The energy market shrugged off a surprise 1.28-million-barrel build from the [Energy Information Administration] weekly crude oil report," OANDA senior market analyst Edward Moya said. "The reflation trade and vaccine optimism has given the energy market to keep pushing oil prices higher. Despite a stronger dollar, oil prices are still looking attractive for many traders."
US commercial crude stocks climbed 1.28 million barrels to 463.04 million barrels last week, EIA data showed Feb. 24, leaving them 0.3% above the five-year average for this time of year.
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The inventory build was predicated on a massive slowdown in refinery demand caused by severe weather across the southern US. Power outages and extremely low temperatures affected all of Texas' 5.9 million b/d of refinery capacity last week, according to filings made with state environmental regulators, with as much as 4.4 million b/d of capacity fully offline Feb. 18.
NYMEX March RBOB settled up 3.70 cents at $1.8956/gal and March ULSD climbed 4.03 cents to $1.9083/gal.
Total refinery net crude inputs plunged 2.59 million b/d to 12.23 million b/d -- the lowest since the week ended Sept. 19, 2008 -- as refinery utilization plunged 14.5 percentage points to 68.6% of capacity.
Gulf Coast refineries bore the brunt of the slowdown, with regional utilization rates falling to 62.8% of capacity, down 23.7 percentage points from the week prior, but Midwest refinery runs also were down 9.4 points at 76% of capacity. USGC refinery utilization was the weakest since Sept. 2017, when Hurricane Harvey inundated the Texas and Louisiana coasts.
US gasoline stocks edged 10,000 barrels higher to 257.1 million barrels, an eight-month high, according to EIA data. Distillate stocks fell 4.97 million barrels to 152.72 million barrels.
Total US crude production averaged 9.7 million b/d last week, down 1.1 million b/d from the week prior and the lowest since late August. Most of this slowdown was likely realized on the USGC, where severe weather shut in nearly 4 million b/d of production last week.
"Speculators are betting that last week's events in Texas will likely keep oil prices higher for some time, as they claim production restarts will be slow, and some distressed operations will not reopen," TD Securities head of commodity strategy Bart Melek said in a note. "Sentiment is also increasingly bullish among key participants, citing reflationary tailwinds and strong economic growth."
While some upstream outages are likely to linger for several weeks, around 95% of shut-in production had been returned to service as of Feb. 24, according to S&P Global Platts Analytics.
Oil prices were trending higher ahead of the data release amid increasingly bullish expectations that the market could absorb an expected reduction in voluntary cuts from OPEC+ at their next meeting March 4.
"Should OPEC+ make a U-turn on voluntary cuts, there is enough tightness and pent[-up] demand to cover it. Renewed lockdowns have not had as big of a drag on demand as in March, as people and industry have adapted. Vaccine rollouts in the US and UK have been pretty good, and other countries should soon follow, so you have to factor in a demand recovery in the second half of the year," Global Risk Management's trader Alex Black said.
"There might be a pullback from OPEC+ supply increases but they cannot increase supply massively. Many producing countries in the Middle East require prices around these levels, and we also don't know how quickly idled supply could be turned back online. Higher prices are here to stay," Black added.
OPEC+ ministers are set to meet March 4 to decide on quotas for April and perhaps beyond, with Saudi Arabia having boosted the market by unilaterally cutting an extra 1 million b/d in February and March.
