Oil Extends Gains On Dropping Stockpile, Weaker Dollar

Oil rose for a second day after the US reported the biggest crude stockpile drop since September while the dollar slipped.

Futures in New York gained 2.1% on Thursday in a thinly traded session as a weaker dollar helped bolster the appeal of commodities.

The price of WTI crude rose by nearly 2% on Thursday on EIA reports that US implied petroleum products demand had risen to record highs.

US implied petroleum products demand rose to 23.191 million barrel per day for week ending December 10. The previous record was set during week ending August 27 of this year, which reached fresh highs of 22.820 million barrel per day.

The increase in demand for petroleum products inspired fresh optimism in the market, as uncertainty in the markets faded after the Federal Reserve’s policy decision. The price of a barrel of WTI rose to USD 72.04, up USD 1.17 (+1.65%) on the day.

The price of a Brent barrel also increased despite measures taken to thwart the new Omicron variant, rising to USD 74.76, up USD 0.88 (+1.19%) on the day. Oil prices are now at a three-week high.

The price moves come just days after Saudi Arabia’s energy minister warned traders not to short oil as they did over Thanksgiving.

To prevent such actions, the OPEC+ left open its previous meeting in case it needed to make last-minute changes to its production strategy. Currently, the group is slated to increase production by 400,000 barrel per day starting in January.

But excessive shorts or falling prices could prompt the group to curb those production increase plans. Indeed, leaving the meeting open and in a suspended state, and Saudi Arabia’s warnings to shorters that betting against oil would leave traders “ouching like hell” have lent support to oil prices.

The oil price rise is somewhat tempered by fears of an Omicron surge that some argue is, at this point, unstoppable.
The US Energy Department on Wednesday reported a 4.58 million-barrel slump in crude inventories, a bullish signal to investors which may quell previous demand outlook concerns.