Oil Prices Jump After Massive U.S. Stockpile Draw And Hope Of OPEC Defying Expectations

Meanwhile, Russia's economy is climbing out of its Covid lockdown hole: File Image/PixaBay

Wednesday saw a marked reversal of the previous session's crude price losses thanks to another massive drop in U.S. fuel inventories and talk that the Organization of the Petroleum Exporting Countries (OPEC) might decide not to relax output restrictions when the cartel meets to discuss the issue tomorrow.

After the Energy Information Administration reported that gasoline inventories fell to 243.5 million barrels and distillate stockpiles fell by the most since 2003 to 143 million barrels (thanks to the recent Texas winter freeze), Brent rose $1.75, or 2.8 percent, to $64.45 per barrel; West Texas Intermediate settled 2.56 percent higher at $61.28 per barrel.

Matt Sallee, portfolio manager at Tortoise, said, "Things came in pretty much as expected with the enormous product draw more than offsetting the record crude build."

Crude prices were also supported by three sources telling Reuters that contrary to expectations, OPEC and its allies are considering rolling over production cuts from March into April rather than raising output.

TD Securities commodity strategists stated in a note, "Elevated price levels will incentivize the cartel to taper their output cuts, but given the uncertainty, the market is likely to be on edge heading into tomorrow's meeting."

For the record, OPEC expects global oil demand this year to grow by 5.8 million barrels per day (bpd) to about 96 million bpd, just slightly lower than demand of 100 million bpd in 2019.

The dramatic early results of the global Covid vaccine dissemination continued to buoy crude traders, and on Wednesday U.S. president Joe Biden said his country would have enough vaccines for every American adult by the end of May after Merck & Co agreed to make rival Johnson & Johnson's inoculation.

Meanwhile, another country whose economy is pulling out of a Covid lockdown slump is Russia, which on Wednesday was reported to be discussing a proposal to cut borrowing this year to 3.2 trillion rubles from 3.7 trillion rubles or perhaps even as high as 1 trillion rubles.

Oil prices in the former Soviet Union have jumped by over 20 percent this year, and the government has about 450 billion rubles left over from last year when non-energy revenues came in higher than expected.