By Adedapo Adesanya
Crude oil prices recovered on Wednesday after the Energy Information Administration (EIA) reported an inventory draw of 4.6 million barrels for the week to December 10.
Yesterday, Brent rose by 0.83 per cent or 61 cents to settle at $74.50 per barrel while the West Texas Intermediate (WTI) went up by 1.02 per cent or 72 cents to trade at $71.59 per barrel.
At 428.3 million barrels, crude oil inventories remain 7 per barrel below the five-year average.
Last week’s draw compares with a modest 200,000-barrel decline in crude oil inventories for the previous week.
On Tuesday, the American Petroleum Institute (API) estimated a crude oil inventory draw of 815,000 barrels for the week to December 10.
At the previous session, prices were pressured by pandemic concerns after the International Energy Agency (IEA) said in its latest monthly oil report that the omicron variant was about to have a negative effect on oil demand.
This substituted reports that the variant causes much milder symptoms in those infected than previous variants after the World Health Organisation (WHO) assessment said it poses a very high global risk, with some evidence that it evades vaccine protection.
The prospect of the US Federal Reserve speeding up the start of fiscal stimulus tapering and raising interest rates earlier than previously expected had also added to downward pressures on oil.
However, the Federal Reserve said it would end its pandemic-era bond purchases in March and begin raising interest rates as unemployment remains low and inflation has risen.
Analysts, however, noted that Omicron remains the biggest factor here, noting that as more information comes out about potential lockdowns or travel restrictions, prices could see a pullback.
Estimates from the IEA and others expect the oil market balance to start shifting to oversupply as soon as this month and see supply exceeding demand in the first quarter of 2022.
Already, the Organisation of the Petroleum Exporting Countries (OPEC) revised down slightly its demand forecast for this quarter, mostly to account for COVID-19 containment measures in Europe and the potential impact of the new Omicron COVID-19 variant.
However, it kept its full-year demand growth for 2022 estimate unchanged with growth still expected at 4.2 million barrels per day compared to this year.
Commerzbank said that the international crude oil benchmark Brent is set to drop to $70 per barrel on the back of an expected oversupply of oil in the first quarter of 2022.
Modupe Gbadeyanka