- US oil stockpiles dropped by 5.89 million barrels for the week ending on December 16.
- The demand for heating oil in the US is expected to skyrocket.
- There are concerns about demand brought on by China’s COVID-19 increase.
On Thursday, Oil prices increased for the fourth day in a row as US crude, heating oil, and jet fuel stockpiles tightened just as a wintry blast slammed the country and travel was expected to spike during the holiday season.
Oil increased on Wednesday as official data revealed that US oil stockpiles dropped by 5.89 million barrels for the week ending on December 16, far more than analysts had predicted. Analysts had expected a 1.65 million barrel drop.
Distillate stocks, including heating oil and jet fuel, also fell against predictions for an increase.
With a major winter storm scheduled to hit the United States, the demand for heating oil is expected to skyrocket. Record-breaking low temperatures are expected in Florida and the eastern states, and wind chills below zero are predicted to reach as far south as Texas.
An Arctic blast rushed through a large section of the United States on Wednesday, gripping much of the country with biting cold and life-threatening wind chills. This is also anticipated to make holiday travel for millions of Americans more difficult.
A post-COVID surge in travel for the Christmas season is predicted to increase jet fuel usage as well.
The head of commodity analysis at the National Australia Bank, Baden Moore, claimed that the oil market was nicely balanced.
“As we look ahead to 2023, we expect that China’s re-opening and a probable sustained steady roll-up in global jet consumption (towards 2019 levels) will tighten global petroleum markets and raise prices.”
However, concerns about demand brought on by China’s COVID-19 increase and worries about a global recession could limit the rise of oil futures.
A top World Health Organization official stated on Wednesday that there are concerns about China’s lack of data. This suggested that the country may find it difficult to maintain an accurate tally of COVID infections as cases have increased significantly.
Even with the unexpected reduction in US stockpiles, Vandana Hari, the founder of oil market monitoring service Vanda Insights, said the gains looked exaggerated. She predicted that any short-term props would likely lose to bearish demand concerns.