DTN Oil

WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session higher, with the U.S. crude benchmark notching a 1.5% gain on the back of a larger-than-expected drawdown from U.S. commercial crude oil inventories that overshadowed another weekly build in gasoline supplies and a sharp contraction in fuel demand amid consumer pullback on travel.

Mobility across the largest cities in the United States declined markedly over the past 12 days as an omicron-led surge in COVID-19 infections rippled through the country, prompting shutdowns of schools and employee absenteeism. Apple mobility data shows in cities like New York and Chicago, driving plunged by more than 40% since the emergence of the omicron variant in late November. Restaurant reservations across the United States remained in negative territory each day so far this year, averaging 28% below the pre-pandemic level.

More than 145,900 people were in U.S. hospitals with COVID-19 as of Tuesday -- a number that surpasses the previous peak from mid-January 2021 and is almost twice what it was two weeks ago, according to data from the Department of Health and Human Services.

"Omicron, with its extraordinary, unprecedented degree of efficiency of transmissibility, will ultimately find just about everybody," Dr. Anthony Fauci told J. Stephen Morrison, senior vice president of the Center for Strategic and International Studies. "Those who have been vaccinated and boosted would also get exposed."

Oil traders pay close attention to those developments as they directly correlate with gasoline demand in the United States. The Energy Information Administration reported Wednesday morning gasoline supplied to the U.S. market -- a measure of demand -- slumped to the lowest weekly rate since February 2021 at 7.9 million barrels per day (bpd), down 266,000 bpd from the previous week. As a result, gasoline stockpiles built by more than 8 million barrels (bbl) in the reviewed week after surging 10 million bbl in the final week of December.

Offsetting bearish parts of the report, U.S. crude oil inventories declined for the sixth consecutive week through Jan. 7, down 4.6 million bbl to 413.3 million bbl and remain about 8% below the five-year average. Oil stored at Cushing, the delivery point for West Texas Intermediate, fell 2.5 million bbl from the previous week to 34.8 million bbl. A crude draw was realized even as domestic refineries processed fewer barrels last week, with utilization rates slipping to 88.4% of capacity.

According to the latest Global Economic Prospects report prepared by the World Bank, global growth is likely to decelerate from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023. The global outlook is clouded by various downside risks, including renewed COVID-19 outbreaks, new virus variants, the possibility of de-anchored inflation expectations and record-high debt levels.

U.S. inflation surged to the highest point in 40 years over the 12 months ending December, according to data released Wednesday morning by the U.S. Labor Department. Last month's increase in consumer prices was once again broad-based, with gains accelerating in the indexes for shelter, food, used cars and trucks, and new vehicles among other contributors. The energy index, however, declined 0.4% in December, ending a long series of increases, as the indexes for gasoline and natural gas both decreased. As in November, the indexes for motor vehicle insurance and recreation were among the few to decline over the month.

The fresh data might suggest inflationary pressures across the U.S. economy are cooling off amid softer demand and fading effects of the federal stimulus. On Tuesday, Federal Reserve Chairman Jerome Powell said the economy no longer requires aggressive stimulus measures despite the surge in omicron-led coronavirus infections.

On the session, front-month WTI futures rallied $1.42 or 1.87% to $82.64 bbl, while ICE Brent crude for March delivery advanced $0.95 to $84.67 bbl. NYMEX February RBOB futures gained to $2.3908 gallon, up 3.34 cents on the session, and the front-month ULSD contract advanced 3.08 cents to $2.5942 gallon.

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