The latest data from the Energy Information Administration (EIA) from January 14th showed a small crude inventory build of 500,000 barrels. This has been coupled with a large increase of gasoline which added 5.9 million barrels. Even with this inventory build, United States commercial petroleum stocks have declined most of the past eighteen months. The continuous decline in petroleum stocks suggest that supply has not caught up with demand resulting in rising crude oil prices. This has led to petroleum stocks falling below seasonal averages for the past five years and even below the five-year average prior to the pandemic in 2020.
On a global scale, declining petroleum stocks have contributed to market tightness for OPEC+, with the oil cartel being unable to meet its monthly quota and rising global demand as economies look to return to normal. According to Dean Foreman, chief economist for the American Petroleum Institute, “By contrast, the production of U.S. crude oil and natural gas liquids remained flat overall, with a minimal response by investment and drilling even as oil prices returned to more than $80 per barrel in January.”
Major Wall Street financial institutions Goldman Sachs, JP Morgan and Morgan Stanley have forecasted that crude could reach $100 per barrel as early as this year due to strong demand, lack of investment in new supply and low inventories. At the time of this blog, WTI Crude is trading at $83.24, and Brent Crude is trading at $86.42.