Oil nears a year high after US stocks drop

Oil prices rose more than 2%, near their highest levels in nearly a year, today, Wednesday, after government data showed U.S. crude inventories fell to their lowest level since March, while OPEC + kept the supply reduction agreement unchanged.

As of 4:05 p.m. GMT, Brent futures were up $ 1.37, or 2.4%, to $ 58.83 a barrel, their highest since last February. West Texas Intermediate U.S. crude futures rose $ 1.45, or 2.7%, to $ 56.21 a barrel, its highest since January 2020.

The US Energy Information Administration said US crude oil inventories fell last week to 475.7 million barrels, the lowest level since March, while refinery operating rates rose 0.6 percentage point.

“The refineries are back in business which is supporting crude … This is an overall favorable report,” said Phil Flynn, chief analyst at Price Futures Group in Chicago.

The market has also received support from the latest estimate from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, the group known as OPEC +, that crude inventories will fall below the five-year average by June.

This indicates that the production cuts implemented by the producers have succeeded in restoring the balance to the market.

The OPEC + Joint Ministerial Committee made no recommendation on oil production policy other than what was decided last month, saying the commitment to cut oil production had reached 101% in December.

He said oil stocks in developed countries fell for the fifth consecutive month in 2020.

On the other hand, she noted that the gradual distribution of vaccines around the world is a positive factor for the rest of the year and strengthens the global economy and the demand for oil.

OPEC + expects production cuts to keep the market in deficit over the year and the deficit to peak at 2 million barrels per day in May, although the group has revised downward its demand growth forecast, as revealed by a document seen by Reuters yesterday.

Market sentiment has also received support from the announcement that Democrats in the US Congress have taken the first steps to introduce a $ 1.9 trillion aid package to mitigate the coronavirus fallout that President Joe Biden proposes without the support of Republicans.