Americas News
Massive Inventory Drop Fails To Galvanize Traders, Oil Prices Mixed
A massive drop in U.S. crude inventories, which is usually an indicator of strong demand, wasn't enough to interrupt trader's fears of demand impacted by rising coronavirus rates, and as a result oil prices on Wednesday were mixed.
After it was announced that inventories dropped by nearly 10 million barrels last week to their lowest levels since March, thus startling a market that was expecting an increase, West Texas Intermediate settled up a modest 24 cents to $52.85 per barrel, and Brent fell 10 cents to $55.81 per barrel.
Brent's losses were said to be minimized by the U.S. Federal Reserve's decision to leave its overnight interest rate near zero to maintain support pending a rebound from the government-induced pandemic recession.
As usual, weighing on prices was infections surges in many European countries and U.S. states, as well as fresh outbreaks in Asia (although data shows the most recent outbreak in China is slowing).
Eugen Weinberg, analyst at Commerzbank, remarked, "Demand concerns should remain with us for some time."
But the oil sector has more to worry about than just Covid: U.S. president Joe Biden on Wednesday signed new executive actions to combat climate change, including pausing new oil and gas leases on federal land and cutting fossil fuel subsidies.
The actions effectively reverse the policies of his predecessor, Donald Trump, who aimed to maximize oil and gas and coal output by removing regulations and easing reviews.
Nonetheless, good news on Wednesday came in the form of Bloomberg reporting that the Western world's largest oil explorers are headed towards earnings thanks to crude prices and refining margins buoyed by the rollout of the Covid-19 vaccines, as well as the prospect of an economic rebound.
Meanwhile, Rob Thummel, a portfolio manager at Tortoise, said the rise in U.S. exports is a "signal that global demand continues to improve and is likely stronger than here in the U.S., at least for now."
Also, Mohammad Barkindo, secretary general of the Organization of the Petroleum Exporting Countries (OPEC), reiterated on Wednesday at an S&P Global Platts virtual conference that he is "cautiously optimistic" about an economic rebound and a pickup in oil demand this year.
