DTN Oil

WASHINGTON (DTN) -- Following a string of session advances, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange slipped in early trading Wednesday after the American Petroleum Institute reported a slightly less-than-expected draw from U.S. commercial crude oil inventories during the holiday week-ended Dec. 24 accompanied with a large build at the Cushing tank farm in Oklahoma amid a rapid buildup in domestic crude oil production.

Firmer U.S. dollar index, currently trading near 96.265 against a basket of foreign currencies, is also weighing on the front-month West Texas Intermediate contract that fell more than $0.40 in overnight trade to $75.56 per barrel (bbl). February Brent crude slipped to $78.69 bbl ahead of contract expiration Thursday afternoon (12/30), with March Brent holding its discount against the expiring contact at $0.24 bbl. NYMEX January RBOB futures fell 0.59 cents to $2.2412 gallon, with the next-month February contract trading near parity. January ULSD contract softened 0.69 cents to $2.3645 gallon and the February contract narrowed its discount to 0.10 cents. Both RBOB and ULSD January contracts expire Friday (12/31) afternoon.

API data on Tuesday showed domestic crude oil supplies fell 3.09 million bbl last week compared with estimates for a 3.2 million bbl drawdown. Oil stored at the Cushing tank farm, meanwhile, increased 1.594 million bbl. API data was bullish for petroleum products, showing gasoline inventories declined 319,000 bbl in the reviewed week compared with estimates for a 200,000 bbl build. DTN Refined Fuels Demand data found demand for motor gasoline jumped more than 5% during the holiday week, bringing U.S. gasoline demand to just 1.1% below pre-pandemic levels. Gasoline consumption has remained nearly on par with 2019 levels in the fourth quarter despite the ongoing surge in omicron COVID-19 cases and higher gasoline prices. The strength in gasoline demand might also suggest that some Americans have chosen to get behind the wheel for Christmas travel instead of boarding a plane amid widespread flight cancellations.

API data showed distillate stocks unexpectedly declined by 716,000 bbl last week compared with estimates for a 200,000 bbl build. Total distillate fuel oil stocks are currently 5% below the three-year average and 7.4% below the five-year average. Distillate demand typically weakens during the holidays with factory production and resulting truck deliveries on pause. Despite a 10.6% fall last week, DTN Refined Fuels Demand data found distillate demand this year has consistently surpassed 2019 levels. Through the January-November period, on-road diesel demand in the United States averaged 7% above 2020 levels and 2% above 2019 levels. Surging imports of goods, demand-driven manufacturing activity and retail sales have all contributed to burgeoning diesel demand this year.

In financial markets, U.S. equities found buying support from a study released from Africa Health Research Institute in South Africa showing antibodies produced by the Omicron virus offers significant protection against earlier COVID-19 strains, including Delta.

"These results are consistent with omicron displacing the delta variant, since it can elicit immunity which neutralizes Delta making re-infection with Delta less likely," the team at AHRI wrote.

For countries with rising rates of COVID infections, this could result in Omicron almost entirely displacing the Delta variant as it becomes the dominant and less fatal strain.

On Tuesday, the Centers for Disease Control and Prevention significantly lowered the percentage estimate of new COVID-19 infections caused by the Omicron strain to 59% after initially indicating new infections at 73%. The average number of daily COVID-19 cases in the United States has hit a record high of 258,312 over the past seven days, according to federal data. The previous peak for the seven-day moving average was 250,141 recorded on Jan. 8. States showing the highest daily infection numbers on Tuesday included New York, which reported as many as 40,780 cases, and California, which reported over 30,000. Texas reported more than 17,000 cases and Ohio over 15,000.

In Europe, The United Kingdom, France, and Italy have all set new record highs for daily COVID-19 cases since the start of the pandemic. UK officials showed little appetite for new COVID shutdowns, saying on Monday there would not be any new restrictions before the end of 2021 as health authorities await more data on whether hospitals can cope with an Omicron wave of infections. The daily count of new COVID-19 infections in England is at the highest since March at 122,189, although hospitalizations have not yet shown a marked increase.

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