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Jan. 27, 2021, 3:14 p.m. EST

U.S. oil prices up as weekly domestic supplies drop by nearly 10 million barrels

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By Myra P. Saefong and William Watts

Oil futures finished mixed on Wednesday, for a second session, with global prices slightly lower, but U.S. benchmark crude up after a government report revealed a weekly drop of nearly 10 million barrels in domestic crude supplies.

“If oil bulls were searching for fresh inspiration, this came in the form of the big drawdown in crude oil inventories last week,” Lukman Otunuga, senior research analyst at FXTM, told MarketWatch.

The Energy Information Administration reported Wednesday that U.S. crude inventories fell by 9.9 million barrels for the week ended Jan. 22. The data compared with the average decline of 1.7 million barrels forecast by analysts polled by S&P Global Platts.

The American Petroleum Institute on Tuesday reported a 5.3 million-barrel decrease.

However, despite the bullish-tilted EIA report, crude fought “headwinds from an accelerating flight from risk-on assets” in afternoon dealings Wednesday, said Matt Smith, director of commodity research at ClipperData. U.S. benchmark stock indexes traded broadly lower Wednesday.

Against this backdrop, West Texas Intermediate crude for March delivery /zigman2/quotes/211629951/delayed CL.1 -2.94% rose 24 cents, or 0.5%, to settle at $52.85 a barrel on the New York Mercantile Exchange, but off the day’s high of $53.30.

March Brent crude , the global benchmark, finished lower, down 10 cents, or 0.2%, at $55.81 a barrel on ICE Futures Europe.

Read: OPEC’s Barkindo stresses importance of oil market stability and investment

“Persistent fog on the U.S. Gulf Coast last week heavily impacted waterborne crude imports,” said Smith. “Despite the fog, crude exports were less impacted, with only outbound traffic from ports allowed at times, helping to exacerbate the large draw” to U.S. Gulf Coast inventories of 6.4 million barrels. 

The EIA data also showed crude stocks at the Cushing, Okla., storage hub fell by 2.3 million barrels for the week, while total domestic oil production edged down by 100,000 barrels to 10.9 million barrels per day last week.

Gasoline supply, meanwhile, climbed by 2.5 million barrels, while distillate stockpiles were down by 800,000 barrels. The S&P Global Platts survey had forecast a supply increase of 1.2 million barrels for gasoline and a decline of 800,000 barrels for distillate inventories.

On Nymex, February gasoline RBG21 fell 0.2% to $1.5771 a gallon, but February heating oil HOG21 added 0.7% to $1.6089 a gallon.

Oil prices may push higher in the near term “thanks to ongoing vaccine efforts and better compliance,” said Lukman. “However, rising coronavirus cases and a possible delay in the U.S. stimulus package are seen countering bullish signals.”

The global tally for confirmed cases of the coronavirus that causes COVID-19 climbed to 100.3 million on Wednesday, according to data aggregated by Johns Hopkins University .

“Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines,” said Warren Patterson, head of commodities strategy at ING, in a note.

“The one factor which has made the market a bit nervous about demand is the localized lockdowns that we are seeing in parts of China,” he said.

Read: Oil and gas interests say drilling pause only hurts already struggling Americans

Natural-gas futures, meanwhile, ended higher as the February contracts expired at the end of the day’s session, and ahead of the EIA’s update on supplies of the fuel due Thursday.

February natural gas settled at $2.76 per million British thermal units, up 3.9%. March natural gas, which became the front-month contract at the day’s settlement, added 2.5% to $2.702.

/zigman2/quotes/211629951/delayed
US : U.S.: Nymex
$ 61.66
-1.87 -2.94%
Volume: 450,135
Feb. 26, 2021 4:59p
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