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Oil futures ended on a mixed note Wednesday, with global prices up slightly but U.S. benchmark crude posting a loss on the back of the biggest weekly increase in domestic crude supplies since April that was seen as due to a possible to “one-off” rise in imports.
The likelihood that a COVID-19 vaccine will soon be rolled out in the U.S. also helped to ease worries surrounding energy demand, limiting downside moves for oil prices.
The Energy Information Administration reported Wednesday that U.S. crude inventories rose by 15.2 million barrels for the week ended Dec. 4. That was the largest weekly climb since April, when the EIA reported a weekly rise of 19.2 million barrels — the biggest weekly rise on record — for the week ended April 10.
Analysts polled by S&P Global Platts, on average, expected to see a weekly decline of 700,000 barrels. The American Petroleum Institute on Tuesday reported a 1.1 million-barrel rise.
“Even though the EIA report shows a large inventory build, a more detailed review tells that the increase in inventory was primarily due to an abnormal increase in imports,” Manish Raj, chief financial officer at Velandera Energy, told MarketWatch.
Total net petroleum imports, the difference between exports and imports, rose to about 4.6 million barrels a day, from 1.9 million barrels per day a week earlier, the EIA reported.
“Since the market is more focused on the fundamentals of supply and demand, it generally disregards one-off imbalances caused due to trade shipments,” said Raj. “A sustained increase in net imports would be problematic, but a one-time event has no bearings on market fundamentals.”
“Reasons for crude-oil build could be as simple as cargoes from the thanksgiving week just being delayed and accounted for last week,” he said.
Against that backdrop, West Texas Intermediate crude for January delivery CL.1, CLF21, fell 8 cents, or 0.2%, to settle at $45.52 a barrel on the New York Mercantile Exchange. That was the lowest front-month contract finish since Dec. 2, according to Dow Jones Market Data.
February Brent crude BRN00, +0.16% BRNG21, +0.16% tacked on 2 cents, or 0.04%, to $48.86 a barrel on ICE Futures Europe.
Oil futures had turned lower after the significant weekly rise in crude supplies reported by the EIA.
The numbers that came out from the EIA were “so eye opening, I had to verify them ,” said Tariq Zahir, managing member at Tyche Capital Advisors. “In the decade we have been trading the energy markets, we have never seen this much of a miss from the expectations.”
Prices had traded higher early Wednesday, ahead of the inventory data, buoyed by optimism surrounding the prospects for a new round of aid spending out of Washington.
“Given how this inventory build has joined the ranks of the one the largest witnessed in 2020, fears are likely to jump over COVID-19 sapping demand for fuel,” Lukman Otunuga, market analysis manger at FXTM, told MarketWatch.
“As coronavirus cases surge in the largest economy in the world and major U.S. states enforce strict lockdown measures, the outlook for oil points south despite the vaccine optimism,” he said.
Gasoline supplies climbed by 4.2 million barrels, while distillate stockpiles were up by 5.2 million barrels, EIA data showed. The S&P Global Platts survey had forecast supply increases of 2.2 million barrels for gasoline and 1.2 million barrels for distillates.
On Nymex Wednesday, January gasoline RBF21, +2.05% tacked on 1.6% to $1.2759 a gallon, but January heating oil HOF21, -0.37% fell nearly 0.6% to $1.3989 a gallon.
January natural gas NGF21, +1.29% added 1.8% to $2.442 per million British thermal units ahead of the EIA’s weekly data on supplies of the fuel due Thursday.
Despite persistent concerns about demand, oil prices have been holding up and and were recently priced close to their recent multi-month highs, said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
Oil prices surged higher in November, looking past a sharp rise in COVID-19 cases as investors cheered progress toward vaccines and prospects of a fuller economic recovery in 2021 despite prospects of a near-term hit to fuel demand.
New infections continue to accelerate, but analysts said prospects for a new round of aid spending in Washington had continued to support crude. U.S. Treasury Secretary Steven Mnuchin on Tuesday offered a $916 billion package to House Speaker Nancy Pelosi, D-Calif., that would include a $600 direct payment to most Americans but eliminate a $300 a week unemployment benefit favored by a bipartisan group of Senate negotiators.
Pelosi said there had been progress, but called dropping the supplemental jobless benefits unacceptable. Senate Majority Leader Mitch McConnell claimed Democratic leaders were uncooperative.
