By Adedapo Adesanya
Oil prices went into the bearish zone on Wednesday, losing some gains even as an industry report showed a further drop in crude inventories.
Yesterday, the Brent dropped 51 cents or 0.9 per cent to sell at $56.09 per barrel, while the West Texas Intermediate (WTI) crude slumped by 0.49 per cent or 28 cents to trade at $52.93 per barrel.
Crude inventories in the US dropped by 5.8 million barrels last week to around 484.5 million barrels, data from the American Petroleum Institute showed.
As at press time, the government-backed Energy Information Administration (EIA) had not released its result but there are expectations for a 2.1 million barrels drop.
Both benchmarks have reached their highest since February before the coronavirus outbreak in China began spreading across the world and billions of people went into lockdowns to prevent a pandemic that is now in a deadlier second wave.
However, there is still the focus on rollouts of vaccines, which has not been smooth running so far with much of the world yet to receive.
Falling inventories and rising oil prices are likely to see US drillers come back into the market, especially as Saudi Arabia and other major producers cut their output.
The latest developments in Europe and the United States where death tolls and new infections keep rising also dampened prices yesterday because they affected demand recovery.
On that end, global oil demand is expected to grow by 5.6 million barrels per day in 2021 compared to the 2020 low of 92.2 million barrels per day, the U.S. Energy Information Administration (EIA) said in its latest estimate, with the growth forecast now around 200,000 barrels per day lower compared to last month’s outlook.
In its January Short-Term Energy Outlook (STEO), the EIA expects global consumption of petroleum and liquid fuels to average 97.77 million barrels per day this year, down from the December STEO estimate of 98 million barrels per day.
For 2020, global oil demand averaged 92.2 million barrels per day, down by 9.0 million barrels per day from 2019. The 2020 estimate is also lower compared to EIA’s December forecast of 92.38 million barrels per day.
The Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) will publish their first monthly reports for this year with their latest oil demand and production forecasts on January 14 and January 19, respectively.
