Oil Rally Continues, Crude Adding Another 2% Price Increase
The New Year rally has not shown any signs of stopping on Wednesday as crude prices gained another 2% after the previous day’s 4% increase, not influenced by an obvious slump in US government data.
US government data clearly showed a slump in demand for gas as the need to fill up tanks decreased after5 the holidays. Additionally, a surge in the Omicron variant of COVID-19 influenced employer plans to bring workers back into offices, reducing commuting and other travel that requires fuel.
Gasoline stockpiles increased by 7.96 million barrels last week, the Energy Information Administration said on Wednesday, overwhelming forecasts for growth of 2.41 million. The latest build added to the previous week’s rise of 10.13-million barrels, which already accounted for the largest weekly surge in gasoline stocks since the peak of the coronavirus pandemic in April 2020.
Distillate inventories, which are refined into diesel for trucks, buses, trains and ships, as well as fuel for jets, also rose more than expected for a second week in a row, rising by 2.54 million barrels against a forecast of 1.76 million.
“It’s quite perplexing to see these sorts of fuel stockpiles, which we haven’t had for nearly two years since the worst of the coronavirus pandemic. It shows that refiners are still turning out gasoline-like anything although it’s already winter, with fewer people driving, especially with Omicron cases on the rise”, John Kilduff - founding partner at New York-based energy hedge fund Again Capital commented.
US crude stockpiles, however, saw a stockpile drop of 4.6 million barrels last week, on top of the previous week's drop of 2.1 million. Crude stockpiles have fallen by around 23 million barrels over the past six weeks, accounting for the current balance of gasoline and distillates in the market.
WTI has experienced Wednesday’s trade up of $1.42, settling at $82.92 per barrel. Following Tuesday’s near 4% gain, WTI is up almost 5% week-to-date and has risen nearly 16% over the past four weeks.
Brent, on the other hand, has gained 95 cents, settling at $84.67 per barrel. Brent is up more than 3% on the week, with a net gain of around 14% over the past four weeks.
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