Oil prices climb on Wednesday, settling at a two-month high, with U.S. crude inventories posting a decline for a seventh straight week and traders mostly upbeat on the outlook for the economy and oil demand.
“Crude prices continue to set new highs for 2022, with prompt benchmarks now near their highest point since November last year,” said Robbie Fraser, global research and analytics manager at Schneider Electric. “The current bullishness is a mixture of crude fundamentals and more macro factors tied to the broader economic outlook.” Inventory data will “continue to be key through the early weeks of 2022 as the market eyes any signal that balances are improving, and that the market could see a run of more oversupplied conditions,” he said in a note.
On Wednesday, however, the Energy Information Administration reported a 4.6 million-barrel fall in U.S. crude suppliers for the week ended Jan. 7, to 413.3 million barrels, excluding stocks in the Strategic Petroleum Reserve. That was the lowest weekly supply reading since 2018, EIA data show. Crude supplies also marked a seventh-straight weekly decline, and came in well above the average 1.6 million barrel decrease expected by analysts polled by S&P Global Platts. The American Petroleum Institude on Tuesday reported a 1.1 million-barrel fall.
West Texas Intermediate crude for February delivery rose $1.42, or nearly 1.8%, to settle at $82.64 a barrel on the New York Mercantile Exchange. March Brent crude, the global benchmark, climbed 95 cents, or 1.1%, to $84.67 a barrel on ICE Futures Europe. Prices for both front-month contracts finished the session at their highest since Nov. 9, FactSet data show.
The EIA also reported weekly inventory increases of 8 million barrels for gasoline and 2.5 million barrels for distillates. The S&P Global Platts survey expected supply gains of 3 million barrels for gasoline and 2 million barrels for distillates. On Nymex Wednesday, February gasoline tacked on 1.4% to $2.391 a gallon and February heating oil rose 1.2% to $2.594 a gallon.
“With such a rapid spreading virus leaving a large percent of the population sick at the same time, and given that cases are multiples higher than the previous seasonal COVID peaks, this has meant a sharp drop in driving and economic activity,” said Troy Vincent, senior market analyst at DTN. “This has caused U.S. gasoline inventories to surge by over 18 million barrels in the past two weeks alone.” From here, “demand during this seasonally weak travel period will be key, along with the length of any unplanned outages in countries like Libya and Kazakhstan,” said Schneider Electric’s Fraser.
The EIA data, meanwhile, showed crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 2.5 million barrels for the week, while total domestic petroleum production fell 100,000 barrels to 11.7 million barrels per day. Crude oil stocks at the Strategic Petroleum Reserve fell modestly to 593.4 million barrels, down 300,000 barrels for the week.
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