Oil prices fell yesterday following President Trump's call for lower prices during his speech at the World Economic Forum. European gas prices, however, remain well-supported due to storage concerns. Trump urged OPEC to increase production, but achieving this goal faces challenges due to the OPEC+ alliance and higher fiscal breakeven oil prices for key members. US crude oil inventories continue to decline, while European gas storage levels remain below desired levels.
Oil prices declined yesterday following President Trump's virtual address at the World Economic Forum in Davos. In his speech, President Trump urged for lower oil prices, expressing his intention to request Saudi Arabia and OPEC members to increase production. He posited that reduced oil prices could exert pressure on Russia and contribute to ending the war in Ukraine.
While President Trump was previously vocal about OPEC's need to increase oil output, achieving this goal now faces significant challenges. The OPEC+ alliance, which includes Russia and OPEC members, has tightened its grip on global oil production. Furthermore, key OPEC members require higher fiscal breakeven oil prices, making it difficult to persuade them to boost output. According to the IMF, Saudi Arabia's estimated fiscal breakeven oil price is just under US$91/bbl. Additionally, lower oil prices would deter significant increases in US oil production.US crude oil inventories experienced a ninth consecutive week of declines, falling by 1.02 million barrels. This drop leaves inventories at their lowest point since March 2022. Despite refiners reducing their operational rates due to maintenance, primarily in the US Gulf Coast, crude oil imports increased by 621k b/d while exports rose by 437k b/d. This rise in imports was largely attributed to stronger flows from Canada. Gasoline stocks saw an increase of 2.33 million barrels, despite the decline in refinery activity. However, gasoline stocks on the East Coast decreased following a temporary outage on the Colonial pipeline. In contrast, distillate stocks fell by 3.07 million barrels.Meanwhile, the Henry Hub natural gas price dipped yesterday after a US Energy Information Administration (EIA) storage report revealed a smaller-than-anticipated drawdown of 223 billion cubic feet (Bcf). This figure fell short of the 248Bcf decrease the market anticipated. Forecasts for warmer weather further contributed to the decline in Henry Hub prices. In contrast, European gas prices remain relatively well-supported, with the Title Transfer Facility (TTF) trading close to EUR50/MWh. Concerns persist regarding EU gas storage levels, which currently stand below 58% full, significantly lower than the 74% level at the same time last year and the five-year average of 66%. The market and member countries express growing anxiety about the prospect of refilling storage during the injection season, particularly as the forward curve provides no incentive for storing gas for next winter. The forward curve exhibits backwardation between summer 2025 and winter 2025/26, fueling discussions about potentially forgoing storage refilling.
OIL PRICES OPEC US CRUDE OIL INVENTORIES EUROPEAN GAS PRICES NATURAL GAS STORAGE ENERGY MARKET TRENDS
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