Crude oil prices rose to their highest level since February, with the U.S crude seeing the seventh day of gains.
The recent gains in oil prices are triggered by reports of an impressive drop in U.S. crude oil stockpiles, which helped boosting oil traders’ sentiment on energy demand.
What you should know: At the time of writing Brent oil futures gained by .34% to trade at $57.34, after picking up nearly 2% yesterday. West Texas Intermediate futures rallied by 1.22% to $53.86, having risen 1.7% in the previous session.
- Both major benchmarks traded above the $50 mark and are trading at their highest levels since February 2020.
- Recent data from the American Petroleum Institute showed a drop of 5.821 million barrels in U.S. crude oil supplies for the week ending Jan. 8.
- The draw was larger than the 2.7-million-barrel draw in forecasts anticipated by oil experts as well as the 1.663-million-barrel draw reported during the previous week.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics spoke on the macros supporting oil prices at least for the near term;
“Crude oil rallied to pre-pandemic levels. Brent traded as high as US$56.75 after bouncing on a larger crude draw than expected. A weaker US dollar helped and complimented numerous price revisions by several analysts for still higher 2021 estimates on the tailwind from the surprise 1mb/d cut announced by Saudi Arabia.
“The remainder of this week’s currency action now sets up for a weaker US dollar through a droop US CPI print and via Fed Chair Powell’s dovish lens which will be oil supportive as oil is priced in dollars. This dynamic is already playing out in Asia this morning.
“While the higher oil prices story continues to make sense, I suspect China’s rapid response to the outbreak”
What to expect: Oil traders anticipate sizable scrutiny as to whether WTI over $50 will prompt increased investment or whether a conservative financial strategy prevails,” Innes added.
- Also, as money flows to where investors can make profits and the higher oil price go, not only will Shale producers be keen to turn up the taps but so will OPEC+.