By Barani Krishnan
Investing.com - One swallow doesn’t make a summer. Likewise, one positive EIA dataset for the winter doesn’t ensure oil’s fundamentals will stay strong through a season when demand for travel is typically anemic, what more with a pandemic in force.
Crude prices turned around from two straight sessions of weakness to rally for the first time on Wednesday after supportive weekly inventory data from the U.S. Energy Information Administration.
New York-traded WTI, the key indicator for U.S. crude, settled up $1.10, or 2.3%, at $48.12 per barrel. It fell a cumulative 4.2% in the two previous days.
London-traded Brent, the global benchmark for crude, finished the day’s trade up $1.16, or also 2.3%, at $51.24. Brent lost just over 4% for Monday and Tuesday combined. Brent also briefly fell below the key support of $50 in those sessions.
Prior to the two-day drop, oil prices had been on a tear for seven weeks in a row on bets that people across the world might soon be able to travel freely as millions of doses of coronavirus vaccines were being prepared for delivery, after approval by relevant health authorities.
The near two-month long rally was halted by news this week that countries across Europe and beyond had barred UK travelers as a new Covid-19 strain from there was spreading to rest of the world. The new variant of the virus was reportedly 70% faster to contract.
The U.S. Centers for Disease Control and Prevention also warned on Tuesday that the new variant of the virus was probably already in America, undetected.
Still, crude prices rebounded Wednesday after the EIA reported inventory data for last week that was broadly positive compared to recent weeks.
Crude stockpiles fell by 562,000 barrels for the week ended Dec. 18, against a drawdown of 3.2 million barrels expected by the market.
More importantly though was the surprise draw of 1.1 million in gasoline versus the forecast build of 1.2 million.
On the side of diesel-led distillates, the draw of 2.3 million was more than double the expected drop of 904,000.
For the driving component, the gasoline draw was a relief, being the first of its kind in seven weeks. It was also a surprise given that few are driving regularly during the winter.
For distillates, it was the first drop in four weeks — bolstering the theme of higher deliveries for the holiday season by trucks plying coast-to-coast.
Despite the encouraging data, more positive numbers will be needed from the EIA in the coming weeks to affirm that demand was indeed solid amid a deepening of the winter, the end of the holiday-delivery cycle and the possible worsening of Covid-19 case counts despite the start of vaccinations.