Oil rose for a second day after the U.S. reported the biggest crude stockpile drop since September while the dollar slipped.
Futures in New York gained 2.1% on Thursday in a thinly traded session as a weaker dollar helped bolster the appeal of commodities. The U.S. Energy Department on Wednesday reported a 4.58 million-barrel slump in crude inventories, a bullish signal to investors which may quell previous demand outlook concerns.
“We still have a bid in the market from yesterday’s EIA report, which deserves a lot of love,” said Bob Yawger, director of the futures division at Mizuho Securities USA. The report alone gives markets a reason from trading sharply downwards in the upcoming days, he added.
Conflicting signals on demand and supply have seen oil swing between gains and losses this week. While the outlook for consumption appears to be deteriorating as China, the biggest oil importer, limits holiday travel to try and contain omicron, the picture looks more positive in the U.S. The International Energy Agency said this week that the market was already in surplus, but Vitol Group, the world’s largest independent oil trader, expects prices to rise next year due to a lack of new investment in production.
Crude pared some of its gains earlier on Thursday after the Bank of England unexpectedly raised interest rates for the first time since the pandemic struck.
The U.S. government report, which ran counter to the IEA’s outlook, also showed that exports climbed back above 3 million barrels a day with traders pushing barrels out of the country to avoid the impact of year-end taxes on inventories.
“On the one hand we had extremely positive data from the EIA report yesterday, strong implied oil demand, and large inventory draws across crude and oil product,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “And the other element was the Fed, which has supported all risk assets on Thursday.”
Prices:
Surging U.S. gasoline demand before the holiday season suggested concerns about the new virus variant weren’t keeping drivers off the roads. Global onshore crude inventories are also dropping, led by draws in Europe, according to data from consultant Kayrros.
“It will all depend on Omicron and possible lockdowns,” said Hans van Cleef, a senior energy economist at ABN Amro. “But with the holidays coming, and people will gather together, hopefully these boosters will help and prevent a rapid rise of the infections. But risk of more infections is high and therefore my short term guess would be for lower prices instead of higher.”
Meanwhile, the physical crude market in Asia softened as a crackdown on China’s private processors and weaker refining margins crimped demand. The spot premium of Russia’s ESPO to the Dubai benchmark slipped to the least since August, while Sokol and Al-Shaheen’s also dropped over the past month.
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