Oil prices were up this Wednesday as U.S. crude inventories presented a missive drawdown, in contrast with expert’s expectancy of a buildup; still the rapid spread of the covid-19 pandemic around the world, and specially China, weight concerns about demand.
Last week, according to Energy Information Administration’s data, U.S. crude inventories had a massive drop of 9,9 million barrels, to a level of 476,7 million barrels of stock; this is the lowest point of crude inventories since March 2020.
The drop was seen as surprising, as experts expected a build of 430,000 barrels. As a result, Brent crude oil gained 38 cents, 0,7% and closed at $56,29 per barrel; while the West Texas Intermediate (WTI) rose 48 cents, to $53,09, as reported by Reuters.
Inventory draw sparked hopes for demand recovery; in the words of Andrew Lipow, president Lipow Oil Associates in Houston, “The market was led up by a significant draw in crude oil as the refining industry continues to turn the crude oil surplus into refined products.”
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Crude inventories draw and other factors for oil’s increase
Expert Jeffrey Halley of OANDA, confirmed this view by saying to Reuters: “Oil continues consolidating. The Saudi Arabian cuts, OPEC+ compliance above 85% and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021.”
As we reported previously, in April 2020 oil prices presented an historical drop to below zero levels; particularly the WTI, since then, oil prices have recovered slowly. The Biden administration helped, but also the massive cuts of production from the Organization of Petroleum Exporting Countries.
Growing demand in China was also a main factor for oil prices increase; as it is the world’s second largest consumer. Nevertheless, the resurgence of Covid-19 cases are weighting in the hopes for further demand recovery.
Worldwide, the coronavirus has infected more than a 100 million people, and as winter comes to a close, infections in Europe and the Americas keep rising with consistent pace. Nevertheless, China confirmed 75 new cases this Wednesday, the lowest since January 11.