New York—Crude prices lack direction Jan. 27 as the market weighed a bullish US crude draw against pandemic-dimmed demand outlooks.
NYMEX March WTI settled up 24 cents at $52.85/b, and ICE March Brent was down 10 cents at $55.71/b.US commercial crude inventories declined 9.91 million barrels during the week ended Jan. 22 to a 10-month low of 476.65 million barrels, according to US Energy Information Administration data released Jan. 27. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.
The draw far-exceeded American Petroleum Institute data released late Jan. 26 showing a 5.3 million-barrel crude draw over the same period.
The US crude draw sent oil futures higher midday, but the market later gave up these gains amid weakened economic outlooks.
"Oil has been rangebound for the past few weeks and it seems like nothing will change unless something major happens on the COVID front," OANDA senior market analyst Edward Moya said in a note. "Crude prices could surge higher if Europe gets their vaccine rollouts heading in the right direction or tank if virus variants shutdown China and other countries that have been successfully reopening."
NYMEX February RBOB settled down 36 points at $1.5771/gal, while February ULSD finished up 1.05 cents at $1.6089/gal.
Coronavirus concernsThe number of daily COVID-19 deaths in the US climbed to a new high of 4,205 on Jan. 26, according to New York Times data, but as the number of new cases steadily declines, states have begun easing lockdown restrictions.
New York governor Andrew Cuomo on Jan. 27 announced restrictions on nonessential businesses and indoor dining would be lifted across much of the state. The move comes on the heels of California on Jan. 25 lifting a regional stay-at-home order that affected the vast majority of state residents.
Outside of the US, however, the pandemic situation remained grim. In Europe, countries are considering greater restrictions to curb the spread of the virus, whereas in Asia, demand-side concerns remain heightened following an outbreak in China.
Already, authorities in China have called upon citizens to not travel during the Lunar New Year Holiday, souring sentiment in the oil markets.
"While the general upward direction of travel in the market makes sense, it's difficult for oil traders to make a definitive near-term shift to the next price level higher given the very uncertain near-term demand outlook," surmised Stephen Innes, chief global markets strategist at Axi, in a Jan. 27 note.
US gasoline cracks weakened as stockpiles rose amid an unexpected dip in demand. The ICE New York Harbor RBOB crack against Brent edged down 7 cents to around $10.16/b in afternoon trading.
Total gasoline inventories climbed 2.47 million barrels to 247.69 million barrels in the week ended Jan. 22, EIA data showed, as implied demand slipped 3.4% to 7.83 million b/d. The counter-seasonal decline left demand nearly 12% behind the five-year average, in line with levels seen earlier this month.
Notably, Apple Mobility data shows that US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir. This discrepancy suggests a possible disconnect between actual end user demand and the EIA figures, which are a proxy based on product disappearing from primary sources.
