Oil prices rise with high EIA stock report

Crude oil prices rose today after the Energy Information Administration reported a draw of 600,000 barrels in inventory for the week through December 18.

That compared to an estimated 3.1 million barrels draw for the previous week and an inventory increase of 2.7 million barrels for the week through December 18, as estimated by the American Petroleum Institute and reported yesterday. Analysts had expected the EIA to record a 3.25 million barrel drop in inventory last week.

Oil prices have soared in the past two weeks with positive news about vaccines and hopes for a recovery in demand as soon as vaccinations start on a large scale. However, earlier this week, oil reversed its escalation with news of a new, more virulent variant of the coronavirus that has infected thousands in the UK and spawned new travel restrictions in Europe and other parts of the world. The news saw oil traders abandon their positions en masse, bringing prices down.

A decline in the purchase of crude oil by Asian refiners also contributed to the more recent reversal of the oil price fortunes.

Meanwhile, the EIA reported a drop in gasoline inventories of around 1.1 million barrels, with an average production of 8.8 million bpd last week. This compares to an inventory increase of 1 million the week before and the average production of 8.5 million barrels per day.

In spirits, the authority estimated a fall in inventories of 2.3 million barrels, with an average production of 4.6 million bpd. This compares to a modest inventory increase of 200,000 barrels in the previous week and the production of 4.6 million barrels per day.

“Oil prices are wilting amid fears that the new strain will hamper the recovery in fuel demand,” Stephen Brennock, an analyst at PVM Oil Associates, told Bloomberg on Monday when prices started to fall due to the fear of the virus. “At the very least, it reaffirms that the path towards normalizing demand is anything but smooth.”

At the time of this writing, Brent oil was trading at $ 50.81 a barrel, with West Texas Intermediate at $ 47.81.

By Irina Slav for Oilprice.com

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