Oil Prices Fall after U.S President Trump’s Davos Speech
Oil prices came under pressure after President Donald Trump’s virtual address at the World Economic Forum at Davos, where he called for lower oil prices. Brent crude fell to $77 per barrel at the last look. The US benchmark West Texas Intermediate (WTI) decreased to $75 per barrel range.
The U.S president said he would ask Saudi Arabia and the Organisation of Petroleum Exporting Countries (OPEC) members to bring prices down by increasing output.
Trump said that lower oil prices could be used as a way to pressure Russia and help bring an end to the war in Ukraine.
In his previous term, President Trump was very vocal about OPEC needing to pump more oil, ING said.
However, analysts said with Russia becoming increasingly more aligned with OPEC members through the OPEC+ alliance, as well as higher fiscal breakeven oil prices for key members, it will be no easy task to convince OPEC to increase output.
Saudi Arabia is estimated to have a fiscal breakeven oil price just shy of US$91 per barrel, according to the International Monetary Fund.
Commodities strategists at ING said lower oil prices would also be an obstacle to significantly increasing US oil production.
US commercial crude oil inventories decreased by 0.2% during the week ending Jan. 17, according to data released by the Energy Information Administration (EIA) late Thursday.
Inventories fell by around 1 million barrels to 411.7 million barrels, lower than the market prediction of 1 million barrels increase.
Strategic petroleum reserves, which are excluded from commercial crude stocks, increased by approximately 200,000 barrels to 394.6 million barrels last week, the data revealed.
Over the same period, gasoline inventories rose by around 2.3 million barrels to 245.9 million barrels.
This is the ninth consecutive week of declines in crude inventories, which leaves stocks at their lowest level since March 2022, ING said, despite refiners slashing run rates, which was driven by maintenance largely in the US Gulf Coast.
EIA data showed that US crude oil production fell by 4,000 barrels per day (bpd) to about 13.47 million bpd during the week ending Jan. 17.
US crude oil imports increased by 621,000 bpd to approximately 6.74 million bpd while exports increased by 437,000 bpd to around 4.51 million bpd over the same period.
In the Short-Term Energy Outlook (STEO) released on Jan. 14, the EIA predicted that crude oil output in the country would reach an average of 13.55 million bpd in 2025.
The EIA also released its weekly natural gas storage report in which US working storage was reported to have fallen by 223Bcf, less than the 248Bcf draw the market was expecting.
The smaller-than-expected draw and forecasts for some warmer weather saw Henry Hub tick lower yesterday.
European gas prices remain relatively well supported, with TTF trading just shy of EUR50/MWh. Concerns over EU gas storage remain with inventories now below 58% full, down from 74% at the same stage last year and below the five-year average of 66%.
The market and member countries are becoming increasingly concerned about the task of refilling storage through the injection season and the fact that the forward curve provides no incentive to store gas for next winter.
The forward curve is in backwardation between summer 2025 and winter 2025/26. Talk of subsiding the refill of storage is growing.
