The black liquid started the London session today bullish on the back of the latest data from the U.S. Energy Information Administration (EIA), which revealed a decline in the U.S. crude oil inventories to its lowest level since January 2020.
The global benchmark for oil, the brent oil futures is up 1.00%, trading at $74.60 a barrel while the U.S oil, WTI futures is up 1.15%, trading at $73.25 a barrel, as of the time of writing this report. Both oil futures benchmarks have remained above the $70 trading zone.
Yesterday, data released from the U.S EIA showed a decline of 4.089 million barrels in the 3rd week of July. This draw was bigger than expected as forecasts by Investing.com predicted a 2.928-million-barrel draw for the week in question. In the previous week, a 2.108-million-barrel build was recorded. Also, data reported by the American Petroleum Institute (API) revealed that crude oil supply declined by 4.728 million barrels.
The U.S. Federal Reserve stated during its Federal Open Market Committee (FOMC) meeting that its economic recovery is still on track despite a rise in daily COVID-19 cases as it handed down its latest policy decision yesterday. The decision left the interest rate unchanged between 0% and 0.25% but did not provide a timetable for asset tapering.
What they are saying
ANZ analysts stated in a note that, “The EIA oil inventory falls suggest the rise in cases of COVID-19′s Delta variant is having little impact on mobility”.
Warren Patterson, the head of commodities strategy at ING Groep stated in an interview with Bloomberg that, “There appears to be quite a bit of hesitancy to push the market in either direction, leaving it in a holding pattern… there is still uncertainty over the demand picture, with COVID-19 cases continuing to tick higher.”
Analysts believe that fuel demand will likely not recover to its pre-COVID-19 levels until 2022 should the number of COVID-19 cases continue to increase, and the vaccination rate continues to slow down.
Due to the rise in the Delta variant, it may likely affect the demand for the black liquid but so far, the recent EIA data shows that summertime travels are still happening across the U.S.
Investors are currently confident based on the data revealed by the EIA and API but caution is advised as the rising cases of COVID-19 around the world threatens global economic recovery.