Oil prices rise 1.5% as weekly U.S. crude supplies decline, but gasoline inventories rise

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Oil futures rose sharply on Wednesday after US government data revealed a sixth consecutive weekly decline in domestic crude supplies, as well as a more than 10 million barrels rise in gasoline inventories.

“The gross print was a little less than expected, [but] we saw a telltale build in gasoline and a really big build, “at the delivery center in Cushing, Oklahoma, Tariq Zahir, managing member of Tyche Capital Advisors, told MarketWatch.

“At this time of year we usually see drawdowns in the crude and also builds in product markets for tax reasons,” he explained. This tax is assessed based on the volume and price of crude oil inventories, so oil companies are looking to get rid of these taxable assets off their books as the end of the year approaches.

The Energy Information Administration said on Wednesday that U.S. crude inventories fell 2.1 million barrels for the week ending Dec.31. This was the sixth consecutive weekly decline. On average, analysts were forecasting a drop of 4.4 million barrels, according to a survey by S&P Global Platts.

The American Petroleum Institute reported Tuesday night that U.S. crude supplies fell 6.4 million barrels last week.

The EIA, however, also reported weekly increases in inventories of 10.1 million barrels for gasoline and 4.4 million barrels for distillates. The numbers were well above the average of 1.9 million barrels each for the gasoline and distillate grades predicted by analysts polled by S&P Global Platts.

Crude West Texas Intermediate for delivery in February CL00,
+ 1.79%

CLG22,
+ 1.79%
rose $ 1.43, or 1.9%, to $ 78.42 a barrel on the New York Mercantile Exchange. March Brent gross BRN00,
+1.61%

BRNH22,
+1.61%,
the global benchmark, rose $ 1.37, or 1.7%, to $ 81.37 a barrel, following Tuesday’s highest for a first-month contract since Nov. 25.

“The current theme of moderate imports from the US Gulf Coast due to ad valorem tax considerations…, to Kpler.

The market, however, has also seen “a massive surge in gasoline inventories as implied demand plummeted after the pre-holiday ramp-up,” he said in comments via email.

In the exchanges of Wednesday, February gasoline RBG22,
+ 1.16%
was trading at $ 2.304 per gallon, up 1.2%, while heating oil HOG22, in February,
+1.85%
rose 1.7% to $ 2.451 per gallon.

Crude inventories at the Cushing, Oklahoma, Nymex delivery center edged up 2.6 million barrels last week, the EIA reported, although total national oil production was unchanged at 11.8 million. barrels per day.

Crude supplies to the U.S. Strategic Petroleum Reserve fell 1.3 million barrels for the week to 593.7 million barrels, according to EIA data.

Crude prices had soared on Tuesday after the Organization of the Petroleum Exporting Countries and its allies – known together as OPEC + – held out their plans to increase production by 400,000 barrels per day in February. .

“The move to OPEC + reassures the market as it indicates that it is confident about the outlook for demand in the coming months,” said Warren Patterson, head of commodities strategy at ING, in a note.

As oil rebounded from the selloff sparked by the discovery of the omicron variant of the coronavirus that causes COVID-19 in late November, the market may not have come out of the woods, he said. China has put a second city – Yuzhou, with a population of 1.1 million – under lockdown after discovering three asymptomatic cases of COVID-19. Xi’an’s 13 million residents have been under lockdown restrictions since December 23.

“Clearly, China continues to pursue its zero COVID policy and if we were to see more widespread lockdowns nationwide, that would be a concern for oil demand,” Patterson said.

Meanwhile, from a seasonal perspective, “we are in a period of low demand coupled with the implementation of new COVID restrictions [so] we think crude might see some weakness in the days and weeks to come, ”Zahir said.

Read: Failure of China’s zero-COVID policy tops 2022 geopolitical risk list: Eurasia Group

In other Nymex transactions, February natural gas NGG22,
+ 3.58%
was trading at $ 3.814 per million British thermal units, up 2.6%.


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