International Maritime Associates, Inc.

US Crude Inventory Continues to Decline -- Brent Crude Stays Around $60

by Jim McCaul   16 January 2019

US crude inventory continued its downward trajectory last week.   The EIA weekly survey results for the week ending 11 January indicated a decline of 2.7 million barrels in US crude inventory -- the seventh week in a row with a decline or no change.   

But US crude inventory remains 8% above the five year average for this time of year, suggesting supply continues to exceed demand.   

Globally, crude in floating storage has been increasing.  According to ClipperData, 100 million bbls of crude was stored on tankers as of 6 January, an increase of 51% over last month and 31% higher than same time last year. 

But there are indications that crude supply is beginning to decrease.   US shale producers have cut back on production, crude imports in the US over the past four weeks are down 3.6% from last year and tanker tracking data indicate a decline in Saudi crude shipments.

Meanwhile, Brent crude as of 16 January is trading around $61 -- not much change from a week ago.   

The fear of crude prices dropping into the $40s or lower has faded.   Market sentiment has turned positive -- for the time being.   

Most analysts expect that the OPEC+ supply curtailment deal will ultimately rebalance supply and demand and provide support for higher oil prices.   The Saudis are targeting getting crude prices back to the $80 range.  This could happen if supply is kept under tight control and the Chinese economy remains solid.  

And while a global demand slowdown continues to be a near term possibility -- which would keep crude prices (and capital investment decisions) under pressure -- a slowdown seems less likely than a few weeks ago.