Crude oil prices rally up amid high energy demand

Oil prices rallied higher at Wednesday’s trading session in London. The gains in crude oil prices are largely attributed to a larger-than-expected decline in U.S. Stockpiles and hopes for a U.S. COVID-19 fiscal aid package boosted fuel demand recovery outlook.

• At the time of writing this report, Brent oil futures traded at $51.44 printing gains of about 0.40% and West Texas Intermediate futures surged by 0.56% to $48.27 a barrel.

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What this means

Recent data retrieved from the American Petroleum Institute (API) revealed a drop of 4.785 million barrels for the week ended December 25, much larger than the 2.1-million-barrel drop energy experts anticipated earlier.

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What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing macro helping oil prices to stay above key support levels;

• “Oil prices have remained supported by a weaker US dollar overnight and have finally found a friend in the API inventory report. This morning the American Petroleum Institute (API) reported a much larger draw versus consensus in crude oil inventories for the week ended December 25. Any hard-fought gains will be capped by OPEC’s plans to gradually increase oil production after the start of the year despite the new Covid-19 variant increasing government and self-imposed travel restrictions worldwide. We do not have the latest variant in Thailand. Still, the local Covid-19 flare-up has canceled many holiday revelers’ plans and blotted out any New Year’s celebrations, for example.”

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Bottom line

With hopes of larger stimulus checks fading, the bullish report comes as a relief and that along with the weaker US dollar should support oil prices in early Asia trade.

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