Oil Prices Post Over $2 Gain on US Inventory Drop

Oil prices gained over $2 per barrel on Wednesday after a larger-than-expected drop in US crude inventory, although increases were limited by the potential for a major winter storm that could weigh on US travel.

Brent crude futures rose $2.21 or 2.7% to $82.20 per barrel, while the US West Texas Intermediate (WTI) crude futures climbed $2.06 or 2.7% to $78.29 per barrel.

EIA, API Post Inventory Draw, Heavy Snow Seen Curbing Demand

Prices were supported by data from the Energy Information Administration (EIA) showing that US crude stockpiles declined by 5.89 million barrels, surpassing expectations for a draw of 1.66 million barrels.

The EIA also reported that distillate inventories were down by 242,000 barrels, compared with analyst forecasts for a surge of 336,000 barrels.

In addition, data from the American Petroleum Institute posted an inventory fall of 3.1 million in the week to December 16.

Markets now await updates about the full resumption of the Keystone oil pipeline after a 14,000-barrel spill shut down the crucial key artery transporting Canadian crude to the US.

TC Energy Corp. stated that it had removed the broken part of the pipeline that caused the spill last week and made it undergo metallurgical testing as instructed by US regulators.

Oil also strengthened on the possibility of major importer China easing some of its COVID restrictions after no new deaths due to the virus were recorded.

China’s crude oil imports from Russia soared 17% annually in November, as the country’s refiners secured additional cargoes ahead of the $60-per-barrel price curb from the Group of Seven (G7) countries and a ban by the European Union (EU) from December 5.

Russian oil exports slipped 11% month on month from December 1 to 20 after the EU’s embargo on Russian oil took effect.

However, a heavy snowstorm is expected to hit significant parts of the US, potentially leading to extended flight delays and blocked roads this month, which may keep oil demand in check.