Other stocks in U.S. and Europe rise despite coronavirus concerns: File Image/Pixabay.
Yet again, reports of an unexpected decline in U.S. crude stockpiles seemed to contradict analytical worries that demand recovery has stalled due to rising coronavirus infection rates, and as a result oil prices on Tuesday rose to an 11 month high.
Brent settled up 92 cents, or 1.7 percent, at $56.58 per barrel by after touching its highest level since last February at $56.75; West Texas Intermediate gained 96 cents, or 1.8 percent, to $53.28.
Analysts expect crude inventories to fall by 2.7 million barrels for a fifth straight week of declines; also, U.S. crude production is expected to fall by 190,000 barrels per day (bpd) in 2021 to 11.1 million bpd, according to an Energy Information Administration report released on Tuesday,.
Andrew Lebow, senior partner, Commodity Research Group
It's been a dynamic bull trend
Another support to prices on Tuesday was the enduring goodwill caused by Saudi Arabia recently agreeing to cut back production by an extra 1 million bpd in February and March, to maintain a modicum of global supply and demand balance.
Andrew Lebow, senior partner at Commodity Research Group, said, "It's been a dynamic bull trend and the market continues to anticipate inventories are going to be drawn pretty sharply as a result of the Saudi production cutbacks."
But he warned, "At some point, when you get into these bull moves, the market tends to overshoot where the equilibrium price is."
Additionally, next week's swearing in of U.S. president Joe Biden is buoying sentiment not only in crude circles but also in U.S., UK, and European stocks: The pan regional STOXX 600 index rose 0.4 percent on Tuesday, with the oil & gas and travel & leisure sectors climbing more than 1 percent each to lead the gains.
And while lack of travel throughout Europe is a major cause for concern for oil traders, it should be noted that stock of Renault SA rose 1.5 percent after the French automaker said its started 2021 with a higher level of orders than in 2019.
More good news for the oil market was delivered by Morgan Stanley, which stated that Exxon Mobile is poised to reverse several years of under performance and deliver big returns in both dividends and rising stock prices in 2021.
Finally, the EIA in its monthly report released Tuesday said that while gasoline demand next year won't reach prepandemic levels, diesel should eclipse its 2019 performance.