Skip to main content

Oil Prices are on a hot streak despite a recent spate of bearish supply data. Though crude stockpiles just recorded their largest weekly buildup in almost two years, compounding a large decline in implied demand, benchmark oil prices have grinded out a 5-day winning streak for the first time in months.

Resurgent prices have thrown a wrench into the White House’s recent pledge to begin re-filling emergency petroleum stocks that have been drawn down to multi-decade lows. Instead of resupplying the US’s Strategic Petroleum Reserve (SPR), the Department of Energy (DoE) has continued to release millions of barrels per week into the new year.

Related ETF: SPDR S&P Oil & Gas Exploration & Production ETF (XOP), Invesco DB Oil Fund (DBO)

Despite a plunge in implied demand to a 20-month low in the first week of 2023, paired with a massive buildup in crude stockpiles surpassing 18 million barrels, oil prices have managed to surge higher this week. Days of supply, which reflects the level of oil in stock relative to current estimates of demand, has made a shocking turnaround in the past several weeks, swinging wildly from a 33-month low of 25.2 in early December to a 19-month high of 29.1 in the most recent week.

That bearish supply data wasn’t enough to derail a fifth straight day of gains for crude futures, which extended their longest winning streak since early October on Wednesday. Part of that can be chalked up to a re-opening of China’s economy as the world’s second largest economy emerges from the economically suppressive “zero-COVID” strategy that was recently abandoned. As of Thursday morning, a soft US CPI print, suggesting prices actually declined -0.1% MoM in December, pushed WTI even higher, close to $79.00 per barrel.

Though commercial stockpiles may have reached a near-term bottom, the continued draining of US emergency supplies has generated ongoing supply risk. The US’s Strategic Petroleum Reserve (SPR), which used to be as large as 656.1 million barrels in 2020, has now been whittled down to its smallest level since 1983 at less than 372.4 million barrels. The combined total of commercial stocks of crude and the SPR closed out 2022 at…

To read the complete Intelligence Briefing, current All-Access clients, SIGN IN

All-Access clients receive the full-spectrum of MRP’s research, including daily investment insights and unlimited use of our online research archive. For a free trial of MRP’s All-Access membership, or to save 50% on your first year by signing up now, CLICK HERE