Oil Rises As Stockpiles Fall And Anticipation Builds For Stimulus Approval,

Meanwhile, India's refineries return to full operational capacity: File Image/Pixabay

Hope for another stimulus package from Washington coupled with U.S. crude stockpiles falling last week was enough on Wednesday to offset demand worries stemming from the latest wave of government-imposed Covid lockdowns, and as a result oil enjoyed another round of modest price gains.

After U.S. congressional leaders said substantial progress had been made in the months-long standoff on a second coronavirus relief package, Brent rose 32 cents to settle at $51.08 per barrel; West Texas Intermediate rose 20 cents to settle at $47.82 per barrel.

Also, according to the Energy Information Administration, U.S. crude inventories fell by 3.1 million barrels in the week to December 11 compared to analytical expectations of a 1.9-million barrel drop - further indicating that demand decline is not as severe as many observers insist.

Still, despite a second vaccine (from Moderna) set for authorization this week to augment the Pfizer inoculations taking place in Britain, the U.S., and Canada, analysts at FGE wrote in a note, "The biggest near-term downside risk to oil demand expectations is the United States, predominately due to persistent weaknesses in U.S. gasoline demand, given the current trajectory of COVID-19 in the country."

But optimism about the looming end to the pandemic far outweighs concerns, and it was noted on Wednesday that while India hasn't yet put Covid behind it, its oil refineries have, with three state-run processors including Indian Oil Corp. currently operating at close to 100 percent capacity or higher, thanks to increased vehicular traffic.

Shrikant Madhav, chairman of Indian Oil, said, "As we get closer to the Covid-19 vaccine rollout. the fundamentals of the economy being strong, we see a rapid V-shaped recovery in the overall consumption of petroleum products."

Also on Wednesday, Jeanette Casselano, a spokeswoman for AAA, told media that the price of oil may rise further thanks to a strengthening physical market, and that the crude needed to produce gasoline "is climbing due to the vaccination availability and promise that distribution is building toward being more widely available in 2021."