TOKYO: On Thursday, oil climbs in light holiday trade for a second day as a drawdown in U.S. stocks of crude and gasoline lifted demand expectations, while signs of an imminent Brexit agreement raised the risk appetite of investors.
By 0530 GMT, Brent crude futures increased 38 cents, or 0.7%, to $51.58 a barrel, while the U.S. Crude futures for West Texas Intermediate (WTI) increased 31 cents, or 0.6%, to $48.43.
On Wednesday, both contracts gained more than 2%.
“Lower U.S. inventories of crude and fuels as well as signs of a potential Brexit deal which led to weaker U.S. dollar were good news”. Said Hiroyuki Kikukawa, research general manager at Nissan Securities.
“But lingering worries over a new variant of the novel coronavirus capped gains,” he said, adding that with investors in holiday mode, oil markets were quiet.
U.S. crude inventories fell by 562,000 barrels in the week to Dec. 18 to 499.5 million barrels, the Energy Information Administration said on Wednesday.
Gasoline stocks fell by a surprise 1.1 million barrels to 237.8 million barrels, the EIA said, while distillate stockpiles fell by a more-than-expected 2.3 million barrels to 148.9 million barrels.
Oil prices also drew support from news that Britain and the European Union were on the cusp of striking a narrow trade deal on Thursday, swerving away from a chaotic finale to the Brexit split.
The potential deal boosted sterling, which was up 0.2% against the dollar after closing up 0.9%.
A softer dollar makes commodities priced in the greenback more affordable for holders of other currencies.
“Risk appetite among investors improved also because of a rebound in global equities. It underlined that fears over a new variant of the coronavirus have receded a little”. Said Satoru Yoshida, a commodity analyst with Rakuten Securities.
At least four drug manufacturers predict that their COVID-19 vaccines will be successful against the latest fast-spreading strain of the virus that is raging in Britain and are conducting tests that should be confirmed in a few weeks.
Still, as Americans were warned again not to fly for Christmas as the new increase in cases overwhelmed hospitals. Some investors remain jittery about the recovery of oil demand.
On the supply side, U.S. power companies added oil and natural gas rigs for a fifth week in a row this week.
In the week to Dec. 23, the oil and gas plant count, an early indicator of potential production, rose 2 to 348. The energy services company Baker Hughes Co said.
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