On Wednesday night, January 19 (GMT+2), data released by the American Petroleum Institute (API) showed that U.S. crude oil inventories increased by 1.4 million barrels in the week of 14 January, while gasoline inventories increased by 3.5 million barrels. Meanwhile, distillate fuel stocks fell by 1.2 million barrels.
In its latest report, the International Energy Agency (IEA) raised its forecast for global oil demand by 200,000 barrels per day for both 2021 and 2022. The agency also has said that the OPEC+ coalition had achieved only 60 per cent of its planned output increase in December 2021.
In its report, the IEA also said that the global oil market situation appeared to be “tighter” than previously thought, with the latest coronavirus strain having surprisingly little impact on demand, although it is causing supply disruptions.
However, senior energy trader at CIBC Private Wealth Management Rebecca Babin has expressed that the market has already priced in the possibility of tighter supply in 2022, and that the IEA and other agencies are just catching up to that. Babin also added that “event risks in a tight market can cause outsized moves to the upside”.
OPEC officials and analysts also believe that oil prices are likely to continue to rise in the coming months, with oil prices likely to top $100 a barrel despite the spread of the Omicron variant due to a recovery in demand.
Overall, the increase in inventory data has weighed on oil prices. The focus now is on the upcoming US Energy Information Administration (EIA) data, which will be released tonight at 18:00 (GMT+2). If the EIA data displays an increase in inventories, oil prices may drop to 85 in the short term. However, under the current bullish market sentiments, the mid-to-long term trend will still persist.
As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well.