Crude oil futures finished higher Wednesday, extending this month’s rally, after data showed a big drop in U.S. crude inventories, pointing to more robust demand despite the threat of the omicron variant of COVID disrupting some business activity and holiday travel.
“Looks like the fears of demand destruction caused by omicron were greatly exaggerated,” Phil Flynn, senior market analyst at the PRICE Futures Group, told MarketWatch in a phone interview.
The Energy Information Administration reported that U.S. crude inventories fell by 3.576 million barrels in the week ended Dec. 24., while sources said the American Petroleum Institute late Tuesday reported crude-oil inventories fell 3.09 million barrels for the same weekly period.
The EIA also reported that gasoline supplies declined by 1.458 million barrels, as distillate stocks fell by 1.726 million barrels. However, crude supplies in Cushing, Okla., increased by 1.055 million barrels, the agency reported. The report also indicated that U.S. production rose to highs not seen since May of 2020.
Still, Flynn said that report would be read as unequivocally bullish by the oil traders.
“What we saw is that gasoline demand really shot back up last week and the draw in [other] products also gave us a real boost,” the analyst said. “This report looked more like the Fourth of July than Christmas,” Flynn said, referring to the strong seasonal driving period in the summer, compared with Christmas, which is usually more subdued.
“People jumped behind the wheel…and one would expect that we will continue this trend of supply tightness headed into the end of the year,” the Price Futures analyst said.
Meanwhile, Reuters reported support earlier in the week for crude was underpinned by force majeure declarations this month by Ecuador, Libya and Nigeria, tied to some oil production and maintenance issues.
Investors are also relieved that preliminary evidence suggests the omicron variant of COVID produces milder symptoms and won’t lead to harsh restrictions on commerce and travel.
Still, the World Health Organization has said the number of COVID-19 cases recorded world-wide increased by 11% last week compared with the previous week, with the biggest increase in the Americas.
Against that backdrop, oil has been higher, near prices not seen since late November.
West Texas Intermediate crude for February delivery CLG22, +0.61% CL.1, +0.61% was trading 58 cents, or 0.8%, to settle at $76.56 a barrel on the New York Mercantile Exchange, after the U.S. benchmark rose 0.5% on Tuesday to mark the highest settlement since Nov. 24.
February Brent crude BRNG22, -0.09%, the global benchmark, was trading 29 cents, or 0.4%, higher to close at $79.23 a barrel on ICE Futures Europe, after rising 0.4% to the highest price since Nov. 25.
For the week, so far, WTI has risen 4.4% and Brent has climbed 5.4%, with both contracts heading for year-to-date gains of well over 54% after a rise in December of at least 15%, FactSet data show.
Meanwhile, OPEC+ will assess its plans to boost daily oil production among its members to 400,000 bpd starting in February or adjust its output to factor the spread of COVID. The Organization of the Petroleum Exporting Countries and its allies, including Russia, will meet on Jan. 4 to discuss global output strategy.
OPEC+ has resisted calls to boost output because it “wants to provide the market with clear guidance and not deviate from policy on gradual output increases, Reuters reported, citing Russian Deputy Prime Minister Alexander Novak.
Elsewhere in energy, natural-gas futures for January NGF22 were trading 3.10 cents, or 0.8%, lower to end at $4.0240 per million British thermal units, following a 0.1% decline on Tuesday. The January contract expired at the end of Wednesday’s session.
February natural gas futures NGG22, -1.24%, the most-active contract, were trading 3.5 cents, or 0.9%, lower at $3.850 per million British thermal units.
January heating oil HOF22 traded 0.64 cent, or 0.3%, higher, at $2.3778 per gallon, marking the highest finish since Nov. 24, following a 0.8% gain in the previous session. The January contract expires at the end of the week.
January gasoline futures RBF22 picked up 2.46 cents, or 1.1%, to reach $2.2717 per gallon, also marking its highest finish since Nov. 24, following a 0.6% gain Tuesday. Gasoline’s January contract also expires at the conclusion of trading on Friday.
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