Americas News
Big Drawdown Trumps Demand Concerns, Oil Prices Rise
Yet again, analytical oil demand concerns were challenged by reports on Wednesday of a substantial U.S. stockpile drawdown indicating that demand continues to chug along nicely despite headwinds; and as a result, two key benchmarks registered gains of over 1 percent.
Brent rose $1.02, or 1.4 percent, to settle at $74.26 per barrel, while West Texas Intermediate rose 86 cents, or 1.3 percent, to settle at $69.47.
The Energy Information Administration reported a 4.3 million barrel drawdown of crude during the week ended Dec. 8, and this caused Phil Flynn, senior market analyst at Price Futures Group Inc., to say, "This [EIA] report is definitely more supportive than the [API] report that we saw yesterday."
Also supporting prices Tuesday was the U.S. Federal Reserve stating that it was maintaining current interest rates: an indication that monetary policy tightening to fight inflation may be over.
This was augmented by the Fed signalling strongly of the potential for three rate cuts across 2024.
However, Rebecca Babin, a senior energy trader at CIBC Private Wealth, cautioned against reading too much into the drawdowns triggering a recovery in oil prices.
She said, "Is it enough to spark a 'true believers' rally? No, but maybe gives shorts some pause on pressing further."
Further, Bloomberg pointed out that, "key market gauges continue signalling oversupply, with crude futures retreating 25 percent since September.
"Nearby contracts are trading below later dated ones….and some spreads are at the weakest since late 2020."
