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In trading on Wednesday (23), crude oil futures prices closed sharply higher as the EIA report showed that US crude oil inventories fell more than expected and favorable geopolitical developments appeared clearing potential obstacles to further increases in demand for energy assets.
EIA report
The EIA announced that crude oil inventories fell by 562,000 barrels last week (at the end of December 18). According to the S&P Global Platts survey, analysts expect, on average, crude inventories to fall 4.7 million barrels this week.
The report released by API on Tuesday showed that crude oil inventories increased by 2.7 million barrels last week (as of Dec. 18). It is not uncommon for API and EIA data to be out of sync. Investors generally prefer to rely on official EIA reports.
EIA data also showed that crude oil inventories at the Cushing Oil Storage Center in Oklahoma increased by 26,000 barrels last week. In addition, gasoline inventories fell 1.125 million barrels and distillate oil inventories fell 2.325 million barrels last week.
According to the S&P Global Platts survey, analysts expect, on average, gasoline inventories to increase by 1.4 million barrels and distillate inventories to fall by 1.1 million barrels this week.
Geopolitical development is good for gold
“The Sun” reported that the Brexit deal is “in the offing” and that it may be finalized on Wednesday or Christmas Eve, supporting public expectations to avoid a hard Brexit. (A hard Brexit means that the UK has left the EU trade group but has not prepared a trade deal.)
Phil Flynn, Senior Market Analyst at Price Futures Group, said: “The prospect of a Brexit deal and the new corona epidemic relief plan may allow consumers to get more cash, providing support.”
US President Trump criticized the $ 900 billion COVID-19 bailout deal approved by Congress on Tuesday and asked Congress to increase the amount paid directly to the people from $ 600 to $ 2,000.
Travel restrictions from the UK have been relaxed, giving investors a sigh of relief. Previous reports that the new strain of coronavirus has led to an increase in the number of confirmed cases in the UK have prompted countries to take strict preventive measures against travel in the UK.
To prevent the invasion of new strains, France closed its borders to the United Kingdom, but now it has restarted. As long as passengers provide evidence of a negative test result for the novel coronavirus, they can drive or take a ferry to France.
Rystad Energy’s oil market analyst Louise Dickson reported that “restarting transportation and personnel exchanges between the two countries is a positive development, although requiring a virus test report will still hamper action.”
- The price of WTI crude oil futures for February delivery rose $ 1.10, or 2.3%, to close at $ 48.12 a barrel, while the contract fell 2% on Tuesday.
- The price of Brent crude futures for February delivery rose 1.12 dollars, or 2.2%, to close at 51.20 dollars a barrel and fell 1.6% on Tuesday.
According to FactSet, in terms of the most actively traded contracts, WTI crude oil futures are down 2.5% this week and Brent is down 2.1% this week.
Additionally, the media reported that Nigeria’s supply disruption may also provide mild support for crude oil. Exxon Mobil Corp (XOM-US) issued a force majeure advisory to the Qua Iboe crude oil export terminal, but the facility is expected to resume operations in early January.
Other energy raw materials
- The price of gasoline futures for January delivery rose 4.25 cents, or 3.2%, to close at $ 1.3820 per gallon.
- The price of hot fuel oil futures for January delivery rose 3.59 cents, or 2.5%, to settle at $ 1.4975 per gallon.
- The price of natural gas futures for January delivery fell 17.20 cents, or 6.2%, to settle at $ 2.608 per million Btu, the biggest one-day drop since December 7.
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