Oil Continues To Rise On Inventory Declines And Weak Dollar

However, rising virus rates in Europe limit investor enthusiasm: File Image/PixaBay

Larger than expected crude inventory draws reported Wednesday and good compliance by the Organization of the Petroleum Exporting Countries (OPEC) on oil supply cuts helped oil prices overcome rising COVID numbers in Europe and repeat their previous session's performance by rising over 2 percent.

Brent on Wednesday settled up 87 cents, or 2.05 percent, at $43.32 per barrel, while West Texas Intermediate settled up 84 cents, 2.09 percent, at $41.04 per barrel.

The American Petroleum Institute in a new report said U.S. crude inventories fell more than expected in the latest week; Energy Information Administration data is expected to confirm the draw on Thursday.

As for OPEC, two sources told media the cartel achieved 100 percent compliance with a pact to cut oil supply in September.

Citing these factors along with the dollar trading lower on Wednesday, Bob Yawger, director of energy futures at Mizuho, remarked, "The tone has turned bullish here."

Meanwhile, Alexander Novak, energy minister for Russia, said leading oil producers will start easing output curbs as planned in January, regardless of the new COVID infections, while Vicki Hollub, CEO of Occidental Petroleum Corp, told the Energy Intelligence Forum on Wednesday that she expects global oil supply and demand to rebalance by the end of 2021 and that U.S. crude output will grow modestly next year.

Striking a more cautious note today was the International Energy Agency who stated in its latest monthly report that "There is a risk that the demand recovery is stalled by the recent increase in Covid-19 cases in many countries" - and warned that OPEC turning on the taps next year means "there is only limited headroom for the market to absorb."