Decline in US crude stocks and winter warnings in the US drive Brent futures

Front-month ICE Brent has gained by $2.68/bbl on the day, to $82.84/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Commercial US crude oil stocks have declined by 5.89 million bbls to a two-week low of 418.23 million bbls in the week to 16 December, according to data by the Energy Information Administration.

The draw superseded predictions of a 1.6 million-bbl drop from analysts polled by Reuters and is also much higher than the projection of a 3.07 million-bbl drop by the American Petroleum Institute.

Volumes of crude released from strategic petroleum reserves (SPR) declined from the previous week’s 4.74 million bbls to 3.64 million in the week to 16 December. The US Department of Energy will buy up to 3 million bbls to replenish SPRs in February next year at a price below $96/bbl.

Also supporting Brent prices are winter storm warnings in the US, which may boost heating oil demand while depleting supplies following the closure of the Keystone Pipeline. Canadian pipeline operator TC Energy has stated that upcoming cold weather in the area might slow down oil spill cleanup efforts.

Downward pressure:

A growing wave of Covid cases coupled with the reports of a new COVID variant in China has again put China's demand concerns back in the spotlight for oil markets.

World Health Organization chief Tedros Adhanom Ghebreyesus has expressed concern about the nation's health, urging China's government to intensify its vaccination campaign.

The looming recession is putting a damper on the oil markets as the year ends. Analysts and economists have all univocally urged caution, especially for the US and European economies, predicting a "mild to serious" recession next year.

A global economic analyst firm has issued a grim warning, stating that data on China's manufacturing and service sectors' business confidence suggests that the world’s biggest oil importer may head into a recession next year.

By Konica Bhatt

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