MOSCOW (MRC) -- :Oil prices edged higher on Wednesday, rebounding from early losses after US inventory data showed strong consumer demand and as the Federal Reserve said it would end its pandemic-era bond purchases in March to slow rising inflation, reported Reuters.
Prices had been pressured most of the day due to ongoing concerns that supply growth will outpace demand next year and worries that COVID-19 vaccines may be less effective against the spreading Omicron variant.
Brent crude futures settled up 18 cents, or 0.2%, to USD73.88 a barrel. US West Texas Intermediate (WTI) crude ended up 14 cents to USD70.87 a barrel.
The Federal Reserve said it would end its pandemic-era bond purchases in March and begin raising interest rates as unemployment remains low and inflation has risen.
Oil prices rose in line with other risky assets like US equities, which responded positively to the Fed’s statement.
US crude inventories sank by 4.6 million barrels last week and distillate and gasoline stocks also declined, weekly government data showed. Crude exports picked up sharply, while product supplied by refineries, a signal of consumer demand, hit a record 23.2 million barrels per day.
“The EIA data was very strong across all elements, record implied oil demand, large draw of crude and oil products,” said Giovanni Staunovo, commodity analyst at UBS.
That said, oil analysts anticipate the Omicron variant will curb demand in the coming months. The World Health Organization said preliminary evidence indicated vaccines may be less effective against infection and transmission linked to the Omicron variant, which also carries a higher risk of reinfection.
“As more information comes out about potential lockdowns or travel restrictions as a result of Omicron we could see a pullback from here,” said Gary Cunningham, director of market research at Tradition Energy.
On Tuesday, the International Energy Agency (IEA) said a surge in COVID-19 cases would dent global demand for oil while crude output is set to increase, especially in the United States, and supply is set to exceed demand at least until the end of next year.
As MRC informed before, US commercial crude stocks fell 3.48 million barrels to 413.96 million barrels in the week ended Sept. 17, to more than 8% below the five-year average, Energy Information Administration data showed. Stocks were last lower Oct. 5, 2018.
We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.
We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, EIA said in a monthly report earlier this year, a smaller decline than its previous forecast for a drop of 210,000 bpd.
MRC