- WTI is consolidating just to the north of the $48.00 level having made decent gains on Wednesday.
- Positive demand-side factors drove the move higher.
Front-month WTI futures posted solid gains on Wednesday amid a broadly improved appetite for risk. The US benchmark for sweet light crude (West Texas Intermediary or WTI) closed out the session with gains of more than 2.2% or around $1.0, with prices recovering nicely from overnight lows under the $46.50 level to back above the $48.00 mark.
Bullish crude oil factors…
A few factors helped spur demand for crude oil on Wednesday; 1) its looks as though the EU and UK are on the cusp of reaching a deal on their future trading relationship, reducing the risk of an economically damaging WTO end to the transition period and triggering a broad risk-on move that benefitted crude 2) USD was broadly softer, with the Dollar Index (DXY) falling back to the 90.30s from highs around 90.70 on Tuesday (crude oil has a negative correlation to the US dollar), 3) vaccine rollout in the US and other major markets continues (reports suggest over 1M Americans have now received their first Pfizer jab) and Moderna said it thinks it vaccine will still be effective against the new mutant Covid-19 strains from the UK and South Africa.
Meanwhile, some supply-side data was released out of the US; official EIA inventories were not as bearish as APIs on Tuesday, with headline crude oil stocks dropping 560K (versus a more than 3M barrel build in Tuesday’s APIs). Meanwhile, production was unchanged at 11M barrels per day. Separately, the Baker Hughes weekly rig count was released early, given Christmas Eve and Christmas Day holidays on Thursday and Friday; oil rigs were up 1 to 264 in total.
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