Oil Pauses as Rising Fuel Supplies Threaten Rally



Oil Pauses as Rising Fuel Supplies Threaten Rally
Oil in New York was steady after a rally that pushed prices to the highest level in 10 months ran out of steam as a rise in U.S. fuel stockpiles added to concern over a shaky demand outlook.

(Bloomberg) -- Oil in New York was steady after a rally that pushed prices to the highest level in 10 months ran out of steam as a rise in U.S. fuel stockpiles added to concern over a shaky demand outlook.

Futures traded near $53 a barrel after snapping a six-day advance in Wednesday’s session. Stockpiles of gasoline and distillates -- a category that includes diesel -- both increased by more than 4 million barrels last week, according to government data. Crude inventories declined for a fifth week.

Plunging temperatures, meanwhile, have led to rising energy consumption to meet heating needs and Goldman Sachs Group Inc. is forecasting the cold snap may boost demand by at least 1 million barrels a day. Asian utilities are snapping up prompt supplies of fuel oil as power use surges.

Oil is up almost 50% since the end of October following Covid-19 vaccine breakthroughs and Saudi Arabia’s pledge for deeper output cuts. A resurgent virus in some regions, however, is expected to crimp demand and potentially weigh on further price gains. Japan has expanded its state of emergency, while the U.K. reported the most deaths since the pandemic began.

“We need to see some reduction in the product side of the equation before we make the next leap higher,” said Stephen Innes, chief market strategist at Axi. “I don’t think we are going to go much lower. This rally now goes from an OPEC driven rally to a vaccine distribution rally.”

A stronger dollar helped to halt oil’s momentum on Wednesday, making raw materials such as crude that are priced in the currency less attractive to investors. A technical indicator is also signaling WTI is overbought.

Prices

  • West Texas Intermediate for February delivery rose 6 cents to $52.97 a barrel on the New York Mercantile Exchange at 7:25 a.m. London time after slipping 0.6% on Wednesday.
  • Brent for March settlement slid 1 cent to $56.05 on the ICE Futures Europe exchange after falling 0.9% in the previous session.
  • Brent’s prompt timespread was 3 cents a barrel in backwardation, compared with 7 cents at the start of the week.

China’s economic recovery gathered pace in December as the nation’s exports expanded strongly, pushing the trade surplus to a record high. Oil imports, however, fell about 15% last month from November.

The Energy Information Administration reported on Wednesday that U.S. gasoline stockpiles rose by about 4.4 million barrels last week and distillate inventories gained by 4.79 million. Crude supplies fell by 3.25 million barrels.

Other oil-market news:

  • Iraq’s SOMO gave full contractual crude oil supplies to at least three refiners in Asia for February, according to company officials who were informed by the state-owned marketer.
  • OPEC and its allies are focused on depleting the world’s “stubbornly high” oil inventories, the group’s top official said
  • Aircraft tracking in early 2021 shows little sign of any meaningful rebound in flight numbers as coronavirus fears and travel restrictions continue to keep many planes out of the sky.

© 2021 Bloomberg L.P.



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.