Oil Rises After Fuel Stocks Draw Down

Photo credit: Reuters

Oil prices rose nearly 2 percent on Thursday after posting the biggest two-day loss for the start of a year in three decades. 

Fears of a global recession looming caused the big declines in the previous days. Short-term economic signs in the two biggest oil consumers in the world, the U.S. and China, looked weak and caused oil prices to drop. 

On Wednesday, figures showing U.S. manufacturing contracted further in December pressured prices, as did concerns about economic disruption as COVID-19 works its way through China, which has abruptly dropped strict curbs on travel and activity.

Analysts said that China’s ongoing Covid pandemic and the reopening challenges are weighing on the market mood. Those prices rose again on Thursday. 

U.S. gasoline stocks fell 346,000 barrels last week, according to the Energy Information Administration. This is compared to analysts’ expectations for a 486,000-barrel drop. 

Distillate stockpiles, which include diesel and heating oil, fell by 1.4 million in the week. This is compared to expectations for a 396,000-barrel drop. But crude inventories rose more than expected. They rose to 1.7 million barrels, compared with expectations of a 1.2 million-barrel rise. 

Two benchmarks had cumulative declines this week. They went back up on Thursday. Brent crude futures were up $1.31, or 1.7 percent, to $79.15 a barrel, and U.S. West Texas Intermediate crude was up $1.29, or 1.8 percent, at $74.13 a barrel.

The benchmarks’ declines of more than 9 percent on Tuesday and Wednesday were the biggest two-day losses at the start of a year since 1991. 

Top U.S. pipeline operator Colonial Pipeline supported prices earlier in the session on Thursday, saying that its own Line 3 had been shut for unscheduled maintenance with a restart expected for the products line on Jan. 7.

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