Crude Oil Market Grows on Large Drop in US Stockpiles

By Adedapo Adesanya

The crude oil market increased by more than 1 per cent on Friday, buoyed by a large drawdown from US crude inventories last week, with Brent gaining 91 cents or 1.2 per cent to settle at $74.17 per barrel and the US West Texas Intermediate (WTI) jumping by 98 cents or 1.4 per cent to $70.60 per barrel.

Crude oil prices ticked slightly higher after the US Energy Information Administration (EIA) reported a large draw in crude oil inventories for the week to December 20 versus a modest inventory dip of 900,000 barrels for the previous week and a draw of 3.2 million barrels as estimated by the American Petroleum Institute (API) for the week to December 20.

Total motor gasoline (petrol) inventories added 1.6 million barrels in the period, with production averaging 9.9 million barrels daily. This compared with a build of 2.3 million barrels for the previous week when gasoline production stood at an average of 9.9 million barrels.

Optimism over Chinese economic growth has also sparked hopes of higher demand next year from the top oil-importing nation.

The Chinese government is attempting to speed up economic growth through a series of stimulus packages, all of which have been seen as bullish for crude oil prices to varying degrees.

This week, the country agreed to issue special treasury bonds worth 3 trillion yuan ($411 billion) next year.

Despite the stimulus, however, China’s two biggest oil companies recently forecast peak demand in the world’s biggest importer.

CNPC earlier this month said demand for oil in China could peak in 2025, and Sinopec said a few days later the peak may take place in 2027.

China’s oil demand growth has been slowing down due to weaker economic performance and a shift to electric vehicles and LNG-fueled trucks.

Also, the World Bank on Thursday raised its forecast for Chinese economic growth in 2024 and 2025.

On the geopolitical front, the war between Russia and Ukraine may be returning to the forefront after numerous events this week that could impact supplies next year.

North Atlantic Treaty Organisation (NATO), a political-military alliance to promote stability and security, said on Friday it would boost its presence in the Baltic Sea, a day after Finland seized a ship carrying Russian oil on suspicion of causing internet and power cable outages.

In the Middle East, Israel raided a north Gaza hospital on Friday and struck targets linked to the Houthi movement in Yemen on Thursday.