Oil prices rise over $2 on drawdown in U.S. crude stocks

3:58 pm Wednesday, December 21st, 2022

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices rose by more than $2 a barrel on Wednesday after data showed a larger-than-expected draw in U.S. crude stockpiles, but gains were capped by a snowstorm that is expected to hit U.S. travel.

Brent crude futures for February delivery were up by $2.21, or 2.76%, at $82.20 a barrel, while U.S. West Texas Intermediate (WTI) crude futures gained $2.06, or 2.7%, to $78.29.

U.S. crude inventories fell by 5.89 million barrels, according to data from the U.S. Energy Information Administration (EIA), compared with estimates for a drop of 1.66 million barrels. Data from the American Petroleum Institute on Tuesday showed a 3.1 million barrel draw in the week to Dec. 16, market sources said.

“This report is very bullish, especially with the fact that there’s a draw from the crude oil equation and distillate inventories stopped their streak of builds ahead of the cold blast,” said Phil Flynn, analyst at Price Futures group.

Distillate inventories fell by 242,000 barrels, according to EIA data, compared with analyst estimates for a build of 336,000 barrels.

Markets also awaited clarity on when the Keystone pipeline, a major artery ferrying Canadian crude to the United States, would restart after TC Energy said it had removed the ruptured segment of the pipeline that caused an oil spill earlier this month and sent it for metallurgical testing as directed by U.S. regulators.

Prices were also boosted by hopes that China would relax some COVID-19 curbs after no new COVID-19 deaths were reported.

China’s crude oil imports from Russia in November rose 17% year on year as Chinese refiners rushed to secure more cargoes ahead of a price cap imposed by the Group of Seven nations and an EU embargo from Dec. 5.

Meanwhile, Saudi Arabia’s energy minister said on Tuesday that the heavily criticised move by OPEC+ to cut oil output turned out to be the right decision. The comments suggest that OPEC+ may continue to keep supply tight, said CMC Markets analyst Tina Teng.

Potentially curtailing oil demand, huge parts of the United States are forecast to face heavy snow that is likely to cause flight delays and impassable roads during one of the busiest travel periods of the year.

Overall, Russian oil exports fell by 11% month on month for Dec. 1-20 after the European Union’s embargo on Russian oil came into force, the Kommersant daily reported.

(Reporting by Shadia Nasralla, Dmitry Zhdannikov and Rowena Edwards; Additional reporting by Isabel Kua in Singapore; Editing by Kirsten Donovan, Andrea Ricci, David Evans and Alex Richardson)