Crude oil prices finished higher for a sixth straight session on Tuesday after industry data showed a bigger than expected drop in
inventories and investors downplayed rising new deaths and infections in
the pandemic and their potential impact on future demand.
At 10:46 GMT, March WTI crude oil futures are trading $53.38, up $0.14 or +0.26% and March Brent crude oil is at $56.68, up $0.10 or
+0.18%. Both contracts are off their highs and in a position to form a
potentially bearish technical reversal.
Rising coronavirus cases are grabbing the headlines, but may not be having that great of an effect on crude oil prices. Prices may not be
declining on the news, but we can‘t determine that it’s not limiting
gains.
We do know that prices are higher than they were when the impact of COVID-19 started to hit the U.S. economy last March although demand
is still well off levels at that time. The divergence suggests that
buyers are betting heavily that the virus will eventually be contained
and the vaccines are going to work.
American Petroleum Institute Weekly Inventories Report
The American Petroleum Institute (API) reported late Tuesday a draw in crude oil inventories of 5.821 million barrels for the week
ending January 8. Analysts were looking for an inventory draw of 2.266
million barrels for the week.
The API also reported a build in gasoline inventories of 1.876 million barrels for the week ending January 8 – compared to the previous
weeks 5.473-million-barrel build. Analysts had expected a
2.695-million-barrel build for the week.
Distillate inventories also saw another large increase of 4.433 million barrels for the week, compared to last weeks
7.136-million-barrel increase, while Cushing inventories fell this week
by 232,000 barrels.
Daily Forecast
Prices are still be buoyed by Saudi Arabias offer last week to single-handedly and voluntarily cut another 1 million barrels per day
off its oil production in February and March.
In my opinion, buyers are reacting to this news as if there is no real downside risk because they believe OPEC+ will make adjustments to
production to meet any significant demand changes, if necessary.
Traders will have the opportunity to react to the Energy Information Administration (EIA) weekly inventories report at 15:30 GMT.
It is expected to show a 2.7 million barrel drawdown.
U.S. oil production held steady at 11.0 million bpd for the fourth week running, according to the latest data provided by the Energy
Information Administration. This is still millions of barrels below the
13.1 million bpd high reached in March 2020.
