Americas News
"Surprise" Inventory Drawdown Boost Oil As Analysts Eye Stimulus Package
With fears that rising coronavirus rates will impact demand now perpetually influencing crude trading, oil prices were mixed on Wednesday as the worries were somewhat offset by yet another "surprise" decline in U.S, stockpiles and progress on an economic stimulus package from the White House.
The assumption of a stockpile increase, which caused the previous session's oil price losses, were proven unfounded on Wednesday when data showed that inventories actually fell by 2 million barrels in the week to September 25, a clear indicator that demand recovery is still chugging along, albeit slowly.
Also, the Energy Information Administration reported that exports rose while imports fell, which facilitated the drawdown.
This coincided with Steven Mnuchin, U.S. treasury secretary, asserting that all concerned parties would "reach a reasonable compromise" in announcing a $2.2 trillion coronavirus bill, which the House may pass in a matter of days.
Bob Yawger, director of energy futures at Mizuho, remarked, “The race is on to a stimulus bill: it’s good for all industries, and especially for oil, because it is a demand indicator for crude demand.”
Also promising are the output cuts from the Organization of the Petroleum Exporting Countries (OPEC): Caroline Bain, analyst at Capital Economics, remarked, “We suspect compliance with the OPEC+ deal will remain patchy but doubt that this will prevent the group from extending or even deepening its output cuts later this year.”
As a result, the December contract for Brent settled up 74 cents at $42.30 per barrel; West Texas Intermediate rose 93 cents to $40.22 per barrel.
Meanwhile, a Reuters poll of 40 analysts and economists forecast Brent averaging $42.48 per barrel this year and $50.41 in 2021; WTI was pegged at $38.70 per barrel this year (so far it has averaged $38.20).
Global demand was forecast as contracting by 8 million-9.8 million barrels per day (bpd) this year, slightly less than an earlier 8 million-10 million bpd prediction.
But Hans van Cleef, senior energy economist at ABN Amro, echoed what is rapidly becoming the party line by stating, “As long as there is no working vaccine available, the main risk for oil prices is lower-than-expected demand.”
Yet, vaccine dissemination remains on course for the end of this year and the beginning of next, and on Tuesday China, which has already green-lit four different vaccines for front-line use, reported it had approved yet another vaccine for human testing; also Russia’s second candidate vaccine is said to be less than a month away from final trials.
