Mar WTI crude oil (CLH23) this morning is up +0.25 (+0.32%), and Mar RBOB gasoline (RBH23) is down -3.88 (-1.58%).  March Nymex natural gas (NGH23) is down -0.134 (-5.19%).

Crude oil and gasoline prices this morning are mixed.  Optimism about stronger Chinese energy demand is underpinning crude prices after Saudi Aramco on Monday unexpectedly raised its crude prices for Asian customers.  However, crude gave up most of its gains, and gasoline turned lower, on a bearish EIA inventory report.

Mar nat-gas this morning is sharply lower on expectations that mild winter weather will continue to weigh on heating demand.  Forecaster Atmospheric G2 predicts much warmer-than-average temperatures across most of the northern, central, and eastern U.S. through at least February 17.

According to Goldman Sachs, oil demand in China is picking up as the economy reopens, a bullish factor for crude.  Goldman reports that oil demand in China in mid-January rose to 15.5 million bpd from 14.5 million bpd in late November.  Goldman predicts that Chinese consumption of crude will climb by +1.0 million bpd in Q4 of 2023.

Crude prices have carry-over support from Monday when Saudi Aramco unexpectedly increased the price of its Arab Light grade crude shipped to Asian customers in March by 20 cents a barrel versus an expected cut of 20 cents.  That was the first price increase for that crude grade since September.  

Last Wednesday, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia.  Goldman Sachs predicts that OPEC+ will only start to reverse its supply cuts, currently about 2 million bpd, in the second half of this year when accelerating demand will tighten the market.  OPEC Jan crude production fell -60,000 bpd to 29.12 million bpd.

In a bearish factor, Vortexa on Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +3.5% w/w to 76.69 million bbl in the week ended February 3.

Today's weekly EIA inventory report was bearish for crude and its products.  EIA crude inventories rose +2.42 million bbl to a 1-1/2 year high, above expectations for a +2.0 million bbl build.  Also, EIA gasoline supplies rose +5.0 million bl to a 9-1/2 month high, above expectations for a +1.6 million bbl increase.  In addition, EIA distillate stockpiles rose +2.9 million bl to a 1-year high, exceeding expectations of a +1.0 million bbl build.  Finally, crude supplies at Cushing, the delivery point of WTI futures, rose +1.04 million bbl to a 1-1/2 year high.

Today's EIA report showed that (1) U.S. crude oil inventories as of February 3 were +4.0% above the seasonal 5-year average, (2) gasoline inventories were -5.3% below the seasonal 5-year average, and (3) distillate inventories were -15.0% below the 5-year seasonal average.  U.S. crude oil production in the week ended February 3 rose +0.8% w/w to a 2-3/4 year high of 12.3 million bpd, which is only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported last Friday that active U.S. oil rigs in the week ended February 3 fell by -10 rigs to a 4-3/4 month low of 599 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2.  U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.

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