Oil Market Sustains Rally on Positive Demand Outlook
Oil market maintains rally on Wednesday over positive demand outlook as U.S. crude inventories fell by 3 million barrels in the past week to 432.6 million barrels, according to U.S Energy Information Administration (EIA)
U.S. government data showed that fuel demand has climbed to its highest since the start of the COVID-19 pandemic.
Brent crude price hit $71.47 a barrel after gaining 42 cents on Wednesday while the U.S. West Texas Intermediate (WTI) crude rises 6 cents to $67.60 a barrel. Positive demand outlook was driven estimated drop in US stockpiles.
This signal a recovery in oil demand despite virus-induced fears, while a fire at an oil platform in Mexico reduced oil stocks to relieve oversupply concerns.
After dropping 9% last week, prices started the week on a rally after the US Food and Drug Administration (FDA) gave full approval of Pfizer-BioNTech’s COVID-19 vaccine on Monday.
On late Tuesday, the American Petroleum Institute (API) predicted a drop in US crude oil stockpiles of 1.62 million barrels, less than the market expectation of a fall of 2.37 million barrels.
A significant drop in inventories indicates an increase in crude demand in the US, the world’s largest oil consumer, assuaging market concerns over dwindling demand.
Meanwhile, a fire on an offshore oil platform in Mexico reduced production by 444,000 barrels per day – a volume equivalent to the OPEC+ output increase for August – to prop up prices.
The four-week average for U.S. total product supplied, a proxy for fuel demand, soared to nearly 21 million barrels per day, its highest since March 2020, when governments first began to widely impose pandemic-related restrictions, according to EIA.
U.S. crude inventories fell by 3 million barrels in the past week to 432.6 million barrels, EIA said.
Also, Gasoline stocks fell by 2.2 million barrels in the week to 225.92 million barrels, EIA said. Distillate stockpiles, which include diesel and heating oil, rose by 600,000 barrels in the week to 138.46 million barrels.
Over the past three sessions, both Brent and WTI have risen around 9%. The rally erased most of the slump from a week-long losing streak on the back of a resurgence in COVID-19 cases.
It was observed that the price gains came after the Mexican supply fell by more than 400,000 barrels per day following a fire on an oil platform. Mexico’s state oil firm said it expected to resume production by Aug. 30.
Read Also: EIA Makes Upward Adjustment to Oil Projection for 2021/2022
In a promising sign that the spread of infections from the coronavirus Delta variant was easing in China, the country on Wednesday reported just 20 new confirmed coronavirus cases for Aug. 24, down from 35 a day earlier.
Oil Market Sustains Rally on Positive Demand Outlook
