US Crude Stockpiles Tumble
U.S. crude oil stockpiles fell sharply the previous week while fuel inventories rose, the Energy Information Administration (EIA) said on January 6.
Crude inventories fell by 8 million barrels in the week to January 1 to 485.5 million barrels, their biggest decline since August, exceeding analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop. The drawdown in stocks in typical for the end of the year, when energy companies take barrels out of storage to avoid hefty tax bills.
U.S. gasoline stocks rose by 4.5 million barrels last week, the biggest increase since April, the EIA said, ahead of expectations for a 1.5 million-barrel rise.
Distillate stockpiles, which include diesel and heating oil, rose by 6.4 million barrels, versus expectations for a 2.3 million-barrel rise.
US Death Toll Escalates, Cases Rise in Asia, New Lockdowns Possible
The pandemic claimed its highest U.S. death toll yet, killing more than 4,000 people in a single day, while China reported the biggest rise in daily cases in more than five months and Japan may extend a state of emergency beyond the greater Tokyo region, according to Reuters.
UK Prime Minister Boris Johnson reimposed a lockdown in England on Monday as a more transmissible variant of COVID-19 fuels a surge in infections and hospitalization in the country.
Meanwhile, a “soft” state of emergency has been declared in Tokyo and three surrounding districts as authorities tackle rising COVID-19 cases.
Weekly Forecast
The big questions facing traders is how long will the OPEC+ news support speculative buying and at what level will the rising number of COVID-19 cases and potential lockdowns weigh enough on demand to pressure prices.?
The move by Saudi Arabia could keep oil prices propped up until February, but at some point prices will become overextended as the focus shifts toward slower demand for gasoline and other fuels in the United States and other parts of the world due to wider restrictions to contain the spreading COVID-19 pandemic.
Severe mobility restrictions around the world to contain a surge in COVID-19 cases still weighed on fuel sales, weakening the prospect of energy demand recovery in the first half of 2021.
The demand numbers are bearish, which tells me that speculators are bolstering crude oil prices. They have placed a big bet on the vaccines stemming the surge in the virus and putting the global economy back on a path toward a speeding recovery.
Nonetheless, oil prices are ripe for a correction in coming weeks, if speculator-driven rallies are not backed by stronger fuel demand soon.
This is not going to crash prices but return them to more reasonable levels. OPEC+ can always cut production further to offset lower demand. Because of this investors will be looking to buy on any weakness because they believe that OPEC+ is their safety net and has their backs.
For a look at all of today’s economic events, check out our economic calendar.
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January 11, 2021 at 03:29AM
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Oil Price Fundamental Weekly Forecast - Probably Due for a Correction, but OPEC+ Has Tools to Prevent a Crash - FX Empire
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