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US inventory data today at 16:30 CET could be a strong bullish catalyst

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Strong gains ydy. Now it may fool around a bit before breaking USD 90/b. (but it will break). Brent crude jumped 1.7% to USD 88.92/b ydy as the market is starting to price in a possible cyclical upturn rather than any kinds of ”landing” on the back of latest positive (above 50) manufacturing PMI’s from US and China. Intraday it reached as high as USD 89.32/b. This morning Brent is trading 0.2% in positive territory but has so far not yet breached the intraday high from ydy. Are we going to USD 90/b right away or are we going to fool around a little first. The market is a little hesitant as the big number 90 is right above current price level. And usually it does take some fooling around to break such levels. But the fundamentals are fully there to break it. So it is more about when and how it is broken. Maybe some bombs and grenades in the Middle East or Russia is needed as a catalyst to break above.

Bjarne Schieldrop, Chief analyst commodities at SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

US inventory data at 16:30 today could be very bullish. US API ydy indicated a draw in US crude and product stocks of 6.4 m b last week. Normally US total commercial inventories should rise 3.8 m b this time of year. If actual data by the US DOE due today at 16:30 CET confirms indics from API ydy, then it is indeed bullish. US inventories would then diverge negatively vs the normal inventories by a full 10.2 m b. That is very bullish and could be what is needed to drive Brent crude above USD 90/b.

OPEC+ will produce more if needed and more if the crude oil price moves too far to the upside. OPEC+ is in full control both to the downside and to the upside. OPEC+ wants a nice price. Sufficiently high: USD 80/b or more. But not too high either: Not USD 110-120/b. At least not in 2024. Brent crude averaged USD 82.1/b last year. So far this year it has averaged USD 82.1/b. For now it is creating neither inflation nor deflation and is fully neutral as such. If Brent crude moves too much to the upside then it might start to generate some inflationary impulses which again could force central banks to maintain high interest rates for longer to slow inflation through slower economic growth. That is of course negative for oil demand growth and OPEC+ does indeed like solid oil demand growth. So if the oil price moves too much to the upside then OPEC+ will indeed produce more. Saudi Arabia today is only producing some 9 m b/d vs normal 10 m b/d. The other core OPEC members are also producing well below capacity. All of them want to produce more and close to normal if they can do so without driving the oil price below USD 80-85/b. OPEC currently has more than 4 m b/d of spare capacity according to the US EIA. Saudi Arabia would love to produce a normal 10 m b/d if it could do so without driving the oil price below USD 80-85/b. So OPEC(+) is in full control of the market. The oil market is running a deficit all through Q2-24 if the group sticks to targets. While USD 90/b will be broken the upside isn’t unlimited as the group will then produce more (maybe later in the year) to prevent inflationary effects, high rates for longer and damage to global economic growth and oil demand growth.

US commercial crude and product stocks could move down 6.4 m b to 1211 m b if US API is correct in its indicative numbers ydy. Pink dot is assuming API is correct.

US commercial crude and product stocks
Source: SEB graph and calculations, Blbrg data feed, US EIA data

Core OPEC would love to produce more if it could without driving the oil price below USD 80-85/b

Core OPEC oil production
Source: SEB calculations and graph, Blrg data.

OPEC spare capacity at more than 4 m b/d according to the US EIA

OPEC spare capacity
Source: US EIA

Analys

Rising with softer USD and positive markets but less bullish tailwind from nat gas

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Ticking higher along with softer USD and gains in metals and equities. Brent traded down marginally (-0.2%) yesterday to USD 72.02/b following a 2.4% decline on Wednesday. This morning it is ticking up 0.5% to USD 75.4/b, well aligned with a 0.4% softer USD and solid gains in equities and industrial metals. Technically it is neither overbought nor oversold with RSI at 45. Though it is flirting with the 100dma also being below both the 50dma and the 200dma. So, no obvious strength either. The bullish tailwind from nat gas is fading a bit with TTF nat gas falling sharply to below the price of ICE Gasoil (”diesel”).

Bjarne Schieldrop, Chief analyst commodities, SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Longer-dated prices supported at USD 68/b. But looks like a process of fading strength. The longer-dated contracts for Brent keep trading down towards the high 60ies around USD 68/b but are rejected repeatedly. The pricing for these contracts looks like a process of fading strength. Just oozing closer to the USD 68/b level with smaller and smaller bounces each time. Very clear consumer buying interest for oil products when Brent crude prices move towards the USD 68-70/b level. This support level may thus to some degree come from the consumer side of the market. If oil consuming industry loses confidence in the economy, we might see the longer dated prices break below USD 68-70/b. But oil producers may also have limited interest in hedging downside risk at around the 68-mark. So, selling from that side of the market is probably also fading at that level. But also, sellers/producers may change if the global economy was to look shakier.

Microscopic changes in IEA forecast. OPEC(+) still needs to cut in 2025 to balance market. The IEA made only microscopic adjustments to its oil market balance yesterday. Adjusting production in OECD Europe and FSU production slightly lower resulting in call-on-OPEC going up by 0.2 mb/d versus the previous report. Call-on-OPEC is still set to decline from 27.1 mb/d in 2024 to 26.7 mb/d in 2025. A y-y decline of 0.4 mb/d implying that the group will have to cut production comparably in 2025. OPEC+ is of course planning to lift production by 120 kb/d/month from April onwards. Nope, says the IEA. It has to reduce supply instead.

Front-month and longer dated Brent crude oil prices in USD/b bouncing off the USD 68-70/b level.

Front-month and longer dated Brent crude oil prices in USD/b bouncing off the USD 68-70/b level.
Source: SEB graph, Bloomberg data

European TTF front-month price trading sharply lower following signals that nat gas inventories in Europe may not need to mandatory fill to 90% by 1 November anyhow.

European TTF front-month price trading sharply lower following signals that nat gas inventories in Europe may not need to mandatory fill to 90% by 1 November anyhow.
Source: SEB calculations and graph, Bloomberg data
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Analys

Climbing crude inventories in line with seasonal patterns

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Yesterday’s report from the US DOE revealed an increase of 4.1 million barrels in US crude oil inventories for the previous week. This build exceeded the consensus estimate of 2.5 million barrels whilst less than the API forecast of 9 million barrels reported on Tuesday. As of last week, total US crude inventories stand at 428 million barrels, which represents a decrease of 12 million barrels compared to the same week last year.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

In addition, gasoline inventories decreased by 3.0 million barrels, surpassing the consensus estimate of a 0.5-million-barrel drawdown. Conversely, distillate (diesel) inventories saw an increase of 0.135 million barrels, contrary to the expected decline of 1.5 million barrels. In total, commercial inventories (excluding the SPR) – which include crude oil, gasoline, and diesel – rose by 1.2 million barrels.

Refinery utilization improved by 0.5 percentage points, reaching 85% last week. Meanwhile, total products supplied (a proxy for implied demand) over the past four-week period averaged 20.3 million barrels per day, reflecting a 2.8% increase compared to the same period last year.

Additionally, gasoline demand averaged 8.3 million barrels per day over the past four weeks, up by 0.9% from the same period in 2024. Diesel demand averaged 4.2 million barrels per day, showing a significant increase of 13.6% year-on-year. Jet fuel demand also saw an increase of 4.4% compared to the same four-week period in 2024.

The International Energy Agency (IEA) will be releasing its monthly report today at 10:00 CET.

Oil inventories
Oil inventories
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Analys

Crude oil comment: Tariffs spark small reactions, but price gains hold steady

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Brent crude prices bottomed out at USD 74.10 per barrel on Thursday evening (February 6th) after a continuous decline since mid-January. Since then, prices have climbed uninterruptedly by USD 2.5 per barrel, reaching the current level of USD 76.50 per barrel.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

Since the beginning of 2025, price movements have been more volatile compared to the fourth quarter of 2024. Additionally, the market has broken the firm range-bound levels of USD 70–75 per barrel that prevailed from mid-October 2024 to January 2025.

Brent crude rose by nearly USD 1.50 per barrel yesterday (February 10th), driven by a tighter supply outlook. This has been credited to stricter sanctions resulting in Russia producing below its quota. Meanwhile, the US President recently ordered a 25% tariff on all aluminum and steel imports, including from Canada and Mexico, the country’s top two foreign suppliers. The tariffs are set to take effect on March 12, according to the White House.

At present, Brent crude appears to be holding onto its price gains, with little reaction so far to the latest tariff news, as markets await key US CPI data scheduled for tomorrow (February 12th).

As we highlighted last week (link), there has recently been a significant build-up in US crude inventories, with Canadian crude flows increasing rapidly to meet the tariff deadline, which was originally set for March. However, US industry-based inventory data (API) is due to be released later today, and we expect a slowdown, as Canada negotiated a 30-day delay in the imposition of US tariffs. A 10% import tariff on Canadian oil had been proposed.

On top of that, there is an increasing risk to the Gaza ceasefire deal, as both parties have accused each other of violating the terms of the agreement. The US President has stated that Israel should call off its ceasefire agreement with Hamas if hostages are not returned by this weekend, further contributing to heightened geopolitical tensions, as well as the US’ tougher stance on Iran.

Stay tuned. This week, monthly oil market reports from the EIA (this evening), IEA (Thursday, February 13th), and OPEC (tomorrow, February 12th) will be released.

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