Crude built on a Tuesday rebound, fully erasing the ground lost seen in a two-day selloff attributed to fears the spread of omicron would take a toll on travel and other activities over the holidays as countries impose restrictions and individuals curtail movement on their own.
West Texas Intermediate crude for February delivery rose $1.64, or 2.3%, to close at $72.76 a barrel on the New York Mercantile Exchange, the highest close for a most actively traded contract since Nov. 24. February Brent crude, the global benchmark, gained $1.31, or 1.8%, to settle at $75.29 a barrel on ICE Futures Europe, its highest close since Dec. 8.
Oil initially pared gains, then pushed to a new session high after the Energy Information Administration said U.S. crude inventories fell by 4.7 million barrels last week. Analysts surveyed by S&P Global Platts, on average, had looked for a decline of 3.9 million barrels, while sources said the American Petroleum Institute late Tuesday had reported a fall of 3.67 million barrels. Gasoline inventories, however, jumped 5.5 million barrels, versus analyst expectations for a rise of 600,000 barrels and API data showing a 3.7 million barrel increase. The EIA said distillate stocks rose by 400,000 barrels. Analysts had looked for a decline of 1.6 million barrels, while API data was said to show a fall of 849,000 barrels.
“A bullish draw to crude inventories has been somewhat offset by a large build to gasoline stocks as implied demand dipped significantly after last week’s pop higher. Distillates showed a minor build despite implied demand also showing a decent drop,” said Matt Smith, lead oil analyst, Americas, at Kpler, in emailed comments. The draw on crude inventories was driven by a decline on the U.S. Gulf Coast amid stronger refinery runs, while imports were once again subdued due to end-of-year ad valorem tax considerations, Smith said, while continued strength in exports also pulled down Gulf Coast stocks.
A push above the 100-day moving average for WTI, which now stands at $73.97, would likely signal a “big entry point” for speculative traders, said Robert Yawger, executive director for energy futures at Mizuho Securities, in a note, observing that the average hasn’t been topped since the Nov. 26 slide.
With a relative strength index, a gauge used to measure technically overbought and oversold conditions, near 48.23, the market appears to have “room to roam, and could probably take out the 100-day before running into overbought RSI territory,” which is seen when the gauge moves above 70.
