Oil Gains 2% as US Crude Inventories Decline Again
By Adedapo Adesanya
Crude oil prices returned to the positive territory on Wednesday, boosted by another weekly draw in crude inventories in the United States which lifted investors’ hopes for some return in fuel demand.
This development spurred the Brent futures to $1.05 or 2.1 per cent growth to trade at $51.13 per barrel and sparked the 2.21 per cent or $1.04 increase in the price of the West Texas Intermediate (WTI) crude futures to $48.06 per barrel.
Yesterday, it was announced by the Energy Information Administration (EIA) that the US crude inventories fell by 562,000 barrels in the week to December 18 to 499.5 million barrels.
When compared with the previous week, it was lower a draw of 3.1 million barrels estimated for the previous week and an inventory build of 2.7 million barrels for the week to December 18, as estimated by the American Petroleum Institute (API) and reported on Tuesday. Analysts had expected the EIA to report an inventory draw of 3.25 million barrels for last week.
Oil prices have been on the rise the past two weeks on positive vaccine news and hopes for a rebound in demand once vaccinations started on a large scale. However, earlier this week, oil reversed on the news about a new variant of the coronavirus infecting thousands in the United Kingdom, prompting new travel restrictions in Europe and other parts of the world.
However, the news of drops in crude inventories reflects that the market may be seeing continued improvement in demand.
Another news that supported this bullish outcome on Wednesday was from Nigeria, where supply disruptions helped lift prices.
It was reported that Exxon Mobil Corp issued a force majeure on the Qua Iboe crude oil export terminal last week after a fire hit the facility and injured two workers. A force majeure clause excuses parties from performing their obligations or from doing so on time.
Due to the incident, the terminal expected to load about 180,000 barrels per day in December and 150,000 barrels in January will be delayed.
Prices also found support on falling US Dollar as a weak greenback makes dollar-denominated commodities such as crude oil cheaper to holders of other currencies.
However, the market still faces additional pressure as the suggestion by President Donald Trump that he might not sign a stimulus bill into law also weighed on sentiments.
President Trump said he might not sign the $900 billion plan unless stimulus checks are increased from $600 to $2,000.
Earlier in the week, the US Congress had passed the second-biggest economic rescue package in the country’s history, although it could not move the market as expected due to several countries shutting their borders after it was discovered that a new COVID-19 variant was 70 per cent more transmissible.