Oil prices gained this Wednesday pushed by a weaker dollar, still, less-than-expected draws on U.S. crude inventories capped further gains; fears for a slip in demand due to new restrictions imposed to contain the covid19 disease was also a factor for oil prices.
Brent crude was up 49 cents, 1%, and closed to $50,057 a barrel, while the West Texas Intermediate gained 56 cents, 1,2%, to a total of $47,58 per barrel. Both contracts had lost its recovery pace of last week, when the vaccine rollout boosted hopes for a seedy recovery.
As we have reported previously, oil prices were on a rally, as the vaccine rollout was thought to solve the covid19 crisis; nevertheless, when a new variant of the virus was discovered in England, that imposed severe restrictions on the UK, hitting demand.
Italy, Germany and more European countries entered to a second lockdown period and hopes for a speedy recovery faded away, and oil lost its recovery pace. For market watchers, investor need to be cautious and aware that the recovery measure is uncertain.
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Weaker dollar helps oil prices rise
Still, a weaker dollar pushed oil prices for a slight gain, as a weak greenback makes commodities like oil, denominated in dollars, cheaper for holders of other currencies.
Other factors for the decrease was the stock build of crude oil inventories. The American Petroleum Institute reported on Tuesday that U.S crude stockpiles had risen by 2,7 million barrels last week.
In contrast, investors and market watchers were expecting a 3,2-million-barrel draw. That means oil demand is still slipped; for Stephen Brennock of oil brokerage PVM, quoted by Reuters, “The API set the U.S. glut alarm bells ringing.”
According to the Energy Information Administration, crude inventories had fell just by 562,000 barrels in the week ended in December 18; as we’ve said, the expectancy was of a 3,2-million-barrel drop. Also, refinery runs fell by 1,1%, or 169,000 barrels per day, EIA said.