Source: Rohan Gupta
Crude oil futures ticked lower during midmorning trade in Asia Dec. 31 as traders engaged in profit-taking after bullish data from the US Energy Information Association pushed prices higher overnight.
At 11:07 am Singapore time (0307 GMT), the ICE March Brent contract was down 29 cents/b (0.56%) from the Dec. 30 settle at $51.34/b while the NYMEX February light sweet crude contract fell 22 cents/b (0.45%) at $48.18/b.
“Oil prices have edged lower this morning as there may be some profit-taking going on in Asia, but the underlying premise for oil has not changed — it is just not usual for prices in Asian trading to immediately follow overnight trajectories,” Jeffrey Halley, senior market analyst at OANDA, told S&P Global Platts on Dec. 31.
The ICE March Brent and the NYMEX February light sweet crude contracts rose 0.78% and 0.83%, respectively, on Dec. 30 as data from the EIA showed a larger-than-expected draw in US crude inventories.
US crude inventories declined 6.06 million barrels at 493.47 million barrels in the week ended Dec. 25 as exports surged 17% on the week at 3.63 million b/d, according to the EIA data. The crude draw was larger than the 3.8 million-barrel draw predicted by analysts that Platts had surveyed earlier in the week, and was also larger than the 4.785 million-barrel draw reported by the American Petroleum Institute on Dec. 29.
The EIA data also showed improved fundamentals in the downstream gasoline market. Gasoline inventories dropped 1.19 million barrels in the period, counter to analysts’ expectations of a 2.3 million-barrel build. Total product supplied for gasoline — EIA’s proxy for demand — averaged 8.13 million b/d in the period, up 1.3% from the week prior.
The one sour spot in the EIA report was a 3.1 million-barrel build in distillate inventories, which was more bearish than analysts’ expectations of a 1.3 million-barrel build.
The market largely ignored reports that the Oxford-AstraZeneca COVID-19 vaccine was approved for use in the UK, as analysts said optimism about vaccine approvals have already been baked into current prices.
Analysts including Halley said there is usually a lack of liquidity in the markets during this period, which can exaggerate any price movements if there are any relevant developments.
“One-off events could have a material impact on prices given the lack of liquidity. The next major risk-point for oil, and the broader financial markets, is the Georgia senate run-off elections on January 5 in the US,” Halley added.