The EIA sees record production this year and next: File Image/Pixabay
The U.S. crude inventory build, which in the previous session caused a sell-off of the commodity, proved on Wednesday to be smaller than expected; however, trading remained flat.
Brent settled down 1 cent at $86.12 per barrel, while West Texas Intermediate settled up 2 cents at $80.15 per barrel.
The Energy Information Administration reported that that U.S. crude inventories rose by 533,000 barrels in the last week to 448.5 million barrels, compared to analysts' expectations for a 1 million barrel rise.
Energy Information Agency
The WTI price will remain high enough to support crude oil production growth
This caused Phil Flynn, senior market analyst at Price Futures Group Inc., to point out that, "If we look at crude, the increase in stocks was much smaller than anticipated, and that is raising concerns about tightness in supply…..there is no backup supply, like we normally do, as the Strategic Petroleum Reserve is heavily drawn."
However, the analytical community cannot decide if there should be concern about market tightness or a negative impact in demand; the EIA on Wednesday seemed to indicate that demand would remain robust when it stated that, "We forecast that crude oil production in the United States will average 12.4 million barrels per day [bpd] in 2023 and 12.8 million bpd in 2024, surpassing the previous record of 12.3 million b/d set in 2019."
The EIA went on to note that WTI "will average $77 per barrel in 2023 and $72/b in 2024, down from $95/b in 2022; despite declining crude oil prices, we expect the WTI price will remain high enough to support crude oil production growth."
While oil is largely unchanged for the month after a weak start to the year, WTI's 25-day moving average is reportedly close to crossing over its 50-day moving average; markets interpret this as evidence of longer-term strengthening that often spurs additional buying.
In other oil related news on Wednesday were further indications that the European Union's sanctions against Russia are not having their fullest effect, as the former Soviet Union is ramping up oil switching at sea.
Specifically, according to tanker tracking data compiled by Bloomberg, 19 million barrels of Urals crude will "likely get transferred at sea this month and last….the January tally alone is likely to set a record at 14 million barrels."
Bloomberg noted that the sea transfers "represent a more efficient way of getting Russian crude to buyers" and should help to bring down soaring freight bills over time.