Oil Futures Rise on Crude Draw, Vaccine

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby-delivery oil futures on the New York Mercantile Exchange and the Brent contact on the Intercontinental Exchange edged higher in afternoon trade Wednesday. The gains followed data from the Energy Information Administration showing a larger-than-expected draw from U.S. crude oil inventories and improving demand for gasoline during the week ended Dec. 25, while gains in financial markets spurred by Britain's approval of AstraZeneca's COVID-19 vaccine lent additional support.

Both crude benchmarks rose briefly today after government data reported an oil inventory draw of 6.1 million barrels (bbl) for the week to Dec. 25, which exceeded market expectations for 2.06 million bbl decrease. EIA also showed a gasoline inventory draw of 1.2 million bbl for the last week, which compared with a 1.1 million bbl decline a week earlier.

On the session, NYMEX February West Texas Intermediate futures advanced $0.40 to a $48.40-per-bbl settlement, and ICE February Brent expired at $51.34 per bbl, with March Brent futures ending the session with a $0.29 premium against the now-expired contract. NYMEX January ULSD futures settled at $1.4898 gallon for a modest 30-point gain ahead of expiration Thursday, with the February contract settling near parity. NYMEX January RBOB futures rallied 2.41 cents to $1.4120 per gallon ahead of expiration Thursday, with February delivery ending at a 1.07-cent contango.

An earlier-than-usual data release by Baker Hughes showed a rise in the U.S. oil rig count that rose by three this week to 267. That's down 403 from the same time last year. The data was released two days early due to the New Year's Day holiday on Friday.

U.S. equities fell early in the session as a bigger fiscal aid package in the United States looked increasingly unlikely, dampening hopes for a swifter recovery of oil demand that has been hammered by the COVID-19 pandemic.

U.S. Senate Majority Leader Mitch McConnell introduced on Tuesday a competing stimulus bill that would increase the size of the payment checks to $2,000, repeal Section 230 that provides liability protection to social media platforms, and to set up a commission to study election fraud.

Oil traders also will be monitoring the OPEC+ Joint Technical Committee meeting postponed from Dec. 17 to Jan. 4, which will debate oil production levels for the 23-producer group in February. Russian Deputy Prime Minister Alexander Novak said earlier this month the country would support an increase of 500,000 bpd in oil output that could encounter resistance from Saudi Arabia.

"If the situation is normal and stable, we will maintain the increase, because we must smoothly, without hurting the market, reach the indicators that were provided earlier from January 1," Novak explained.

Earlier this month, OPEC+ agreed to adjust an earlier year agreement that would have brought online 2 million barrels per day (bpd) of oil output, reducing production cuts of 7.7 million bpd. Instead, OPEC+ agreed to a 500,000 bpd increase in oil output effective Jan. 1, 2021, and to meet monthly in deciding on further adjustments that can be no more than 500,000 bpd per month.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges