Oil Rises Again As Americans Exhibit Greater Demand Resiliency Than Expected

Meanwhile, mixed messages about the Russian price cap efficacy continue: File Image/Pixabay

The week before Christmas saw a continuation of oil trading optimism on Wednesday, this time due to a higher than anticipated U.S. crude draw that resulted in the highest rally for the commodity since earlier in the month.

West Texas Intermediate settled up $2.06 to $78.29 per barrel after the Energy Information Administration reported a 5.90 million barrel stock draw compared with estimates for a 1.66 million barrel drop.

Brent settled up $2.21 to $82.20 per barrel.

Phil Flynn, senior market analyst at Price Futures Group Inc., said of the numbers, "This report is very bullish, especially with the fact that there's a draw from the crude oil equation and distillate inventories stopped their streak of builds ahead of the cold blast" – a reference to a snowstorm expected to impact U.S. travel.

Distillate inventories fell by 242,000 barrels, according to EIA data, compared with analyst estimates for a build of 336,000 barrels.

Meanwhile, mixed messages about the efficacy of the European Union/Group of Seven's price cap on Russian oil continued on Wednesday: following claims the cap was having little if any impact, media reported that Russia's seaborne oil shipments collapsed in the first week of the sanction, something seen as a potential source of alarm for world governments.

In related news, Berlin confirmed that Germany won't be buying Russian oil at all in 2023; however doubt was raised on Wednesday about a plan to use Russia's pipeline system to import from Kazakhstan instead.

Julian Lee, analyst at Bloomberg, pointed out that "getting piped supplies of Kazakh crude thousands of miles to refineries in eastern Germany would present huge challenges on multiple fronts: the first is that the pipelines through which the oil would have to flow are Russian — the giant Druzhba network, [and] any decision to facilitate such shipments can only be made by Moscow."

As for another issue that has dominated crude trading behaviour of late, TC Energy said it had removed the ruptured segment of pipe from the Keystone Pipeline that caused an oil spill earlier this month; it is now undergoing metallurgical testing, which means the full resumption of the pipeline will not occur until the results of the test are studied and, if necessary, acted upon.

Also, Tina Teng, analyst at CMC Markets, suggested that the Organization of the Petroleum Exporting Countries (OPEC) may continue to keep its crude supply tight, based on Saudi Arabia's energy minister remarking that the cartel's controversial decision to cut oil output turned out to be the right decision.