Crude oil futures are trading higher on Thursday with Brent moving above $49 a barrel as hopes of a faster demand recovery after the release of COVID-19 vaccines offset a huge rise in U.S. crude inventories that showed there was plenty of supply around. Concern over an attack on an Iraqi oilfield also lent support.
Vaccinations Raise Hope of Increased Future Demand
The U.K. began vaccinations this week and they could start as soon as this weekend in the United States, and states have escalated plans for its distribution. Canada on Wednesday approved its first vaccine and said initial shots would be delivered starting next week.
Perhaps dimming some of the optimism over the COVID-19 vaccine, Britain’s medicine regulator warned people with significant allergies not to get Pfizer-BioNTech’s COVID-19 vaccine after two people suffered adverse reactions.
Buyers Shrugging Off Stimulus Snag
The U.S. House of Representatives on Wednesday approved a one-week extension of federal government funding, giving lawmakers more time to agree on a broader coronavirus relief package.
But, the U.S. Senate Majority Leader Mitch McConnell said on Wednesday that lawmakers were still looking for a way forward on a relief package.
Nonetheless, the stalemate doesn’t seem to be bothering crude oil buyers although I am certain that more stimulus would push prices higher faster. Traders probably expect an even bigger stimulus package once Joe Biden takes office on January 20 so the news isn’t that great of a concern.
US Crude Stocks Soar 15 Million Barrels Amid Record Surge in Net Imports
U.S. crude oil stockpiles last week surged the most since April, jumping more than 15 million barrels, as imports rose and exports plunged, the Energy Information Administration (EIA) said on Wednesday.
The unexpected supply build and record rise in net imports stunned the oil market, which has been weighed down by low demand due to the coronavirus pandemic, driving prices lower on an intraday basis. However, buyers have recovered that loss with the rally on Thursday.
Crude inventories rose by 15.2 million barrels in the week to December 4 to 503.2 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel drop.
Net crude imports rose by a record high of 2.7 million barrels per day, the EIA said. That boosted U.S. Gulf Coast stocks by 11.8 million barrels, the most in one week ever, according to EIA data.
The rally is gaining momentum and the WTI futures contract appears to be poised to attempt a breakout over a long-term resistance level at $46.43 and the last main top at $46.68.
The price action also suggests at this time that buyers aren’t too worried about the excess supply. They are betting on the vaccine to take care of the weak demand.
For a look at all of today’s economic events, check out our economic calendar.