Oil Is Under Pressure Amid Concerns About The Spread Of Coronavirus In ChinaMeanwhile, EIA reported that crude inventories increased by 4.4 million barrels.
Oil Video 22.01.21.
Traders Focus On Rising Coronavirus Cases In China
WTI oil made an attempt to settle below the support level at $51.50 as traders became concerned about rising coronavirus cases in China.
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China is one of the world’s largest consumers of oil so the continued spread of the virus in China increases risks for the rebound of oil demand. The current problem is that new coronavirus cases are found in various regions of China so the risks of a negative scenario are increasing.
At the same time, the situation is still under control, as daily coronavirus cases in China have not exceeded 200 which is a very small number compared to the country’s population of more than 1.4 billion people.
Traders will continue to pay close attention to any virus-related news from China. If the number of daily coronavirus cases starts to grow at a rapid pace, oil will find itself under additional pressure.
Crude Inventories Increased By 4.4 Million Barrels
EIA has just provided its Weekly Petroleum Status Report which indicated that crude inventories increased by 4.4 million barrels. The recent API Crude Oil Stock Change report estimated that crude inventories grew by 2.6 million barrel, so EIA report showed a bigger increase.
At this point, crude inventories are about 9% above the five-year average for this time of the year, and there is plenty of work ahead to push them closer to normal levels.
Meanwhile, gasoline inventories decreased by 0.3 million barrels while distillate fuel inventories increased by 0.5 million barrels.
Importantly, domestic oil production remained unchanged at 11 million barrels per day (bpd). Recent Baker Hughes Rig Count reports indicated that the number of rigs drilling for oil continued to increase, but domestic oil production remained unchanged despite the rising number of working rigs.
This is a bullish catalyst for the market as it shows that U.S. oil producers remain very cautious despite higher oil prices. While a surprising increase in crude inventories is concerning, the stable level of domestic oil production may offset the negative impact of the inventory data.
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