Oil Price Fundamental Daily Forecast – Crude Stockpile Drawdown Fuels Rebound, but Gasoline Rise Caps Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed late in the session on Wednesday.

After opening steady on the hopes of additional stimulus from the U.S. government and an improvement in COVID-19 cases in China, the markets broke sharply as the U.S. Dollar turned sharply higher and demand for riskier assets declined.

Prices rebounded and the futures contracts hit new intraday highs after a government report showed unexpected massive drawdown in crude inventory.

At 18:50 GMT, March WTI crude oil is trading $52.80, up $0.19 or +0.36% and March Brent crude oil is at $55.85, down $0.06 or -0.11%.

US Energy Information Administration Weekly Inventories Report

According to the EIA, U.S. crude oil stockpiles fell by nearly 10 million barrels the week-ending January 22 to their lowest since March 2020.

The unexpected 9.9 million-barrel decline, the biggest draw since July, reduced crude inventories to 476.7 million barrels, according to EIA figures. Analysts’ expectations in a Reuters poll were for a 430,000-barrel rise.

The decline was the result of a sharp falloff in imports and a 2.3 million-barrel drawdown in stocks at the Cushing, Oklahoma, delivery hub for crude futures.

Net U.S. crude imports fell by 2.1 million barrels per day, the EIA said.

Refinery crude runs fell by 39,000 bpd, while refinery utilization rates fell by 0.8 percentage points last week, the EIA said.

U.S. gasoline stocks rose by 2.5 million barrels to 247.7 million barrels, the EIA said, compared with expectations for a 1.8 million-barrel rise.

Distillate stockpiles, which include diesel and heating oil, fell by 815,000 barrels in the week, versus expectations for a 361,000-barrel drop.

Short-Term Outlook

The huge drop in crude oil stockpiles was enough to trigger an intraday rebound in prices, but the bigger than expected rise in gasoline stocks may have capped gains.

Also putting a lid on prices was the stronger U.S. Dollar, which likely reduced foreign demand for dollar-denominated crude oil.