Oil: Rally extends on sanctions risk – ING

Oil prices have climbed higher for a fifth consecutive day, reaching new highs as markets react to the risk of tighter US sanctions on Iran. Strategists at ING, Ewa Manthey and Warren Patterson, note that ICE Brent has surpassed $92 a barrel, while WTI has risen above $86 a barrel. The latest weekly inventory report from the Energy Information Administration revealed that US commercial crude oil inventories surged by 4.4 million barrels to 428.8 million barrels, marking the highest level since May.

This increase is attributed to higher domestic supply, stronger exports, and lower imports. However, the Strategic Petroleum Reserve saw a decline of 5.3 million barrels, resulting in a modest overall decrease in US crude oil inventories by 0.9 million barrels. The commercial stock build was driven by higher domestic production despite strong export demand and reduced imports.

Crude exports increased by 1.01 million barrels per day week-on-week to 4.07 million barrels, while imports fell by 746,000 barrels to 6.59 million barrels. Refinery activity remained robust, with crude throughput rising by 216,000 barrels per day and utilization rates reaching 97.2%, close to seasonal highs. Strong refining margins have incentivized refiners to maximize their production rates.

Refined product inventories displayed a mixed trend, with gasoline stocks increasing by 0.69 million barrels to 209.4 million barrels, while distillate inventories fell by 1.5 million barrels to 105.6 million barrels, primarily due to lower imports and reduced domestic production.