- US crude oil stocks fell by about 13 million barrels in the week ending November 25.
- Oil rose with hope for a revival in demand in China, the biggest consumer of petroleum.
- The US Dollar declined after Powell’s speech boosted oil prices.
On Wednesday, Oil prices rose by more than $2 a barrel due to increased demand, tighter supply, a falling dollar, and optimism for a recovery in Chinese demand.
Gains were capped by the OPEC+ decision to conduct its meeting virtually on December 4, which indicates little likelihood of a policy change.
According to the Energy Information Administration, American crude oil stocks fell by about 13 million barrels in the seven days ending November 25, the largest since 2019.
However, as winter approached, heating oil demand decreased for the second week.
There is cause for alarm in this situation, according to Bob Yawger, director of energy futures at Mizuho. According to him, you’ll process a lot of distillate if you run all that crude oil through the refinery.
According to government data released on Wednesday, US oil production increased 2.4% to 12.27 million barrels per day (bpd) in September, the greatest level experienced since the COVID-19 outbreak began.
According to the International Energy Agency’s chief Fatih Birol, by the end of the first quarter of next year, Russian crude production will be reduced by almost 2 million barrels per day.
Maria Zakharova, a spokeswoman for the Russian foreign ministry, said Russia would not provide oil to nations that set a price cap. This will further tighten supply.
On the demand side, the hope for a revival in demand in China, the biggest consumer of petroleum, provided additional support to prices. China reported fewer COVID-19 cases on Wednesday, and the market speculated that travel restrictions might be relaxed due to the weekend demonstrations.
On Wednesday, Guangzhou, a city in the south, loosened COVID prevention regulations in several neighborhoods.
A decrease in the US dollar’s worth boosted prices as well. Dollar-denominated oil contracts become better priced for owners of other currencies, which increases demand.
The Federal Reserve Chair, Jerome Powell, stated that the bank could reduce the rate of interest rate hikes “as soon as December,” which caused the dollar to decline.
Powell’s remarks were a relief to investors who had feared more hawkishness, even though they were roughly in line with earlier remarks. Oil prices might continue climbing as the dollar weakens.
