Oil prices extend gains after United States inventory drop

  • Oil prices extend gains after United States inventory drop

Oil prices extend gains after United States inventory drop

Brent crude, against which Nigeria's oil is priced, was up 95 cents, or 1.7 per cent, at $56.61 per barrel as of 8:55pm Nigerian time on Tuesday after touching its highest since last February at $56.75.

Brent crude climbed 94 cents, or 1.8%, to $55.35 a barrel by 1:25 p.m. EST (1825), its highest since late February, and West Texas Intermediate crude futures (WTI) gained 76 cents, or 1.5%, to $51.59, also its highest since late February.

"The renewed concerns about demand due to very high numbers of new corona cases and further mobility restrictions, plus the stronger USA dollar, are generating selling pressure", Commerzbank analyst Eugen Weinberg said.

Concerns about demand due to rising coronavirus cases worldwide limited gains.

The pandemic claimed its highest USA death toll yet this week, killing more than 4,000 people in a single day, while China reported the biggest rise in daily cases in more than five months and Japan may extend a state of emergency beyond the greater Tokyo region. China imposed lockdowns in parts of the northern province of Hebei and discouraged people from traveling between provinces to curb the spread of virus. A large draw in the API crude inventories and a weakening US Dollar gave oil prices a fresh boost alongside reflation hopes.

Getty ImagesMost OPEC+ producers will hold production steady in the face of new coronavirus lockdowns.

"Although oil prices are declining today, the Saudi move is still keeping them at quite high levels", said Bjornar Tonhaugen, Rystad Energy's head of oil markets. Oil prices have historically displayed a negative correlation with inventories, with a past-12 month correlation coefficient of -0.403 (chart below). "Today the correction is not massive, rather a logical adjustment caused by some bearish demand signals and by a strengthening US dollar".

"The recovery in oil demand is stalling in Europe in particular due to the prolonged lockdowns".

Brent could rise to $65 per barrel by summer 2021, Goldman Sachs said, driven by Saudi cuts and the implications of a shift in power to the Democrats in the United States.