Increased air travel, oil exports come under scrutiny by the experts: File Image/Pixabay
Once again, the analytical community's insistence that oil demand recovery is waning was thrown into serious question when the Energy Information Administration revealed substantial draws instead of hikes in U.S. crude, gasoline, and distillate stocks; and this in turn caused crude prices on Wednesday to rise by over 2 percent.
Crude inventories fell by 562,000 barrels in the week to December 18 to 499.5 million barrels; gasoline stocks fell by a surprise 1.1 million barrels to 237.8 million barrels in the same time period, and distillate stockpiles fell by 2.3 million barrels in the week to 148.9 million barrels, more than expected.
Quinn Kiley, a portfolio manager at Tortoise, remarked, “The draw in crude was small, but traders and producers have been more opportunistic: that would explain the increase in exports.”
Quinn Kiley, portfolio manager, Tortoise
Traders and producers have been more opportunistic: that would explain the increase in exports
Brent crude futures on Wednesday rose $1.12, or 2.2 percent, to settle at $51.20 per barrel, while West Texas Intermediate rose $1.1, or 2.3 percent, to settle at $48.12 per barrel.
Supply disruptions in Nigeria and a falling U.S. dollar also helped support prices, as did a decrease in the number of Americans filing first-time claims for unemployment benefits last week.
Still, analysts and media have a knack of sounding pessimistic even when reporting good news, case in point: foot traffic through airports in the U.S. last weekend topped 1 million people per day for three straight days, something that hasn’t happened since before the government lockdowns to curb Covid; however, Brett Gibbs, oil analyst at Bloomberg Intelligence, said, “It’s positive to see traffic picking back up but it’s still about 63 percent less than last year.
"We don’t see demand materially recovering until the second half of 2021 at the earliest with mass vaccine availability.”
Bloomberg added that while domestic jet fuel demand has risen to the highest since April, "that's still half of where it was at the same time last year."
As for the good news that Europe's refiners have sent over 400,000 barrels per day (bpd) of middle distillates to the U.S. for two straight weeks now (something that hasn't happened since February 2019), Arthur Richier, a freight analyst at Vortexa, said, “It feels like the recent uptick in flows from Europe is more a supply push than a demand pull.
“Considering flows have been growing throughout the fourth quarter as restrictions were re-imposed across Europe, these feel like overproduced, distressed barrels looking for a home.”
Meanwhile on the vaccine front, BioNTech says current inoculations will work against the new U.K. Covid variant that caused oil price losses over the past two sessions, and the World Health Organization predicted the much hoped-for herd immunity against Covid will be achieved by the end of next year.