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Coming off a blistering week, oil appeared to cool off in trading early this week.

Crude oil trading

Oil passes seven-year highs before cooling slightly

Last week was a hell of a week for crude oil.

Prices for Brent and WTI futures soared, taking them beyond seven-year highs, as supply and geopolitical pressures mount.

West Texas Intermediate hit a high of $93.15 on Friday with its counterpart Brent stopping just shy of $94.00 to reach $93.98 on Monday.

Momentum appears to be slowing, however, as crude oil showing signs of exhaustion.

Although WTI reached a high above $92 on Monday 7th January, it had dropped around 1% in trading on Tuesday morning, with the contract exchanging hands for around $90.99.

Brent is faring much the same, trading for $92.17 at the time of writing.

An occasional pullback is good for markets. Indeed, two weeks, both oil benchmarks experienced a softer opening, before heading off the to the highs mentioned above. This could be the case going forward. Of course, the prices could continue to drop. Such is the way of the markets.

The ongoing Ukrainian/Russian tensions have been putting a support under oil for most of the past month, in addition to demand recovery in a post-Omicron world. France says Russia is on the verge of deescalating the situation, so oil prices may cool a little as a result.

Demand recovery is expected to continue at a health clip across 2022. In fact, China is looking to restock its supplies after releasing oil from its strategic reserves. The move mirroring that of the Biden White House was to help slow oil price growth, but that appears to have been fairly ineffective. With China looking to top up its tanks again, we could see prices rise higher.

US drillers try to capitalise on high prices

While Sleepy Joe in the Oval Office frets about prices at the pump, domestic US drillers are apparently looking to capitalise on the recent run of high crude oil prices.

Baker Hughes reports that, in the week ending February 4th, rig counts were up again. Two rigs were added to the United State’s oil infrastructure. The total now stands at 497 operational rigs – some 56% higher than this time last year.

Despite this, some rigs may have had to come offline in Texas and Permian Basin oilfields. A deep arctic freeze has hit the region – though not quite as deep and deadly as last year’s all-encompassing February frost – meaning some production and drilling hubs will have shut.

A quick look at US oil inventories

The latest US oil inventories report from the Energy Information Administration is due on Wednesday. This report will cover crude oil storage data for the week ending February 4th.

We may be able to gauge insights into the latest stats by looking at the previous report.

EIA inventories data showed a one million barrel drawdown for the week ending January 28th.

At 415.1 million barrels, US crude oil inventories are about 9% below the five-year average for this time of year.

Total motor gasoline inventories increased by 2.1 million barrels last week and are about 2% below the five-year average for this time of year.

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