Oil Dips With Other Markets But Kept In Check By Bullish Factors
Demand in the U.S. shows no signs of slowing: File Image/Pixabay
With Thursday being a light trading day across the board, oil followed other markets in experiencing a modest decline, but keeping the losses in check were two factors: tightening U.S. crude supplies and China's potential economic recovery after alleviating its lockdown policies.
Data showed that U.S. inventories fell by 5.89 million barrels for the week ending Dec. 16., plus distillate stocks, which include heating oil and jet fuel, also declined.
Meanwhile, demand for heating oil was set to soar because of a powerful winter storm hitting the United States.
Ed Moya, senior market analyst, Oanda Corp
We are not really seeing any exciting moves
Brent on Thursday was down $1.41 to $80.79 by 1800 GMT, and West Texas Intermediate fell $1.18 to $77.11 per barrel.
Ed Moya, senior market analyst at Oanda Corp., said, "Energy traders seem to be ready for the holidays as we are not really seeing any exciting moves.
"The oil market's biggest wildcard is China and optimism is still strong that the reopening will continue and eventually lead to more demand for crude."
A senior World Health Organization official said that China is experiencing a big spike in Covid cases due to the relaxation of lockdowns, but conspicuously absent in panicked mainstream news media reporting was talk of any Covid deaths, suggesting that the country's population would experience Covid's flu-like conditions and recover relatively quickly, thus keeping demand destruction to a minimum.
Another factor influencing Thursday's trading was U.S. economic data showing the number of people filing for unemployment benefits increased less than expected last week; this along with the economy rebounding faster than previously estimated in the third quarter, kindled fears that the U.S. Federal Reserve would intensify its rate hikes to tame inflation, a move that could slow the economy and hamper fuel consumption.
Phil Flynn, senior market analyst at Price Futures Group Inc., said, "That started to ruin the [trading] momentum because of fears the Fed would be back chopping down the market again."