Oil futures moved lower Wednesday, pressured by forecasts for weaker demand, even as hopes build for progress toward another U.S. economic relief package and data from the U.S. government revealed a weekly decline in crude inventories.
In its monthly report released Tuesday, the International Energy Agency said “demand for crude will rise slower than expected,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. The IEA cut its forecast for a 2021 recovery in demand by 170,000 barrels a day to 5.7 million barrels a day.
Meanwhile, the COVID-19 vaccine “will take several months to have a impact,” said Zahir. The rollout of the COVID-19 vaccine developed by Pfizer Inc. PFE and BioNTech SE BNTX continues, while other vaccine candidates were seen moving closer to approval.
Still, “the recent strength we have seen in the energy sector definitely has a tail wind of the U.S. dollar being weak and still going lower,” said Zahir. On Wednesday, the ICE U.S. Dollar Index DXY, -0.17% was down 0.2%, trading 0.7% lower week to date, providing support for dollar-denominated oil prices.
And the U.S. fiscal stimulus bill, “if it gets passed, also could have an impact going forward,” said Zahir.
Congressional leaders met face to face late Tuesday as efforts continued toward another round of economic relief.
However, “we feel with several [U.S.] states imposing new restrictions, along with European countries doing the same, that the forecast from the IEA of weaker demand going into next year will materialize,” Zahir said.
West Texas Intermediate crude for January delivery CL.1, -0.44% CLF21, -0.44% fell 32 cents, or 0.7%, to $47.30 a barrel on the New York Mercantile Exchange. February Brent crude BRN00, -0.22% BRNG21, -0.22%, the global benchmark, was off 25 cents, or 0.5%, at $50.51 a barrel on ICE Futures Europe.
Both benchmarks finished at more-than-nine-month highs on Tuesday.
The Energy Information Administration reported Wednesday that U.S. crude inventories fell by 3.1 million barrels for the week ended Dec. 11.
That compared with the average decline of 1.9 million barrels forecast by analysts polled by S&P Global Platts. The American Petroleum Institute on Tuesday reported a 1.97 million-barrel increase, according to sources.
The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged up by 200,000 barrels for the week.
Gasoline supply, meanwhile, rose by 1 million barrels, while distillate stockpiles were up by 200,000 barrels. The S&P Global Platts survey had forecast supply increases of 2.6 million barrels for gasoline and 1.1 million barrels for distillates.
Natural gas for January delivery NGF21, -1.23% traded at $2.642 per million British thermal units, down 1.5%.