On December 23, 2021, oil prices plummeted by over 1% after an industry report revealed that there was an unexpected surge in US crude oil inventories. Furthermore, President Donald Trump rattled the global markets by threatening not to sign the much anticipated U.S. COVID-19 relief bill.
Brent crude futures lost 71 cents, which translates to 1.4%, to trade at $49.37 per barrel at 0646 GMT. On the other hand, U.S. West Texas Intermediate (WTI) crude futures lost around 67 cents or 1.4% to trade at $46.35 a barrel. Both of these contracts lost almost 2% on Tuesday which was already a second consecutive session of declines.
Adding onto the doubts on the US situation, the oil market remains quite jittery about the future recovery of demand as a new, and highly infectious strain of the novel COVID-19 has hit Britain; making many countries around the world shut their borders to the country. The vice president, commodities at Kotak Securities, Ravindra Rao, stated:
“This is the holiday period when people go out and that prompts fuel demand. But now, a majority of flights have been canceled to and from the UK, so this is going to impact oil demand (overall). Sometime earlier, the expectation was that the virus threat was subsiding, and demand was slowly and slightly moving higher. But with this update of the new coronavirus strain, the market is purely operating on sentiment right now that it is going to create more restrictions.”
Other Factors Affecting Oil Markets
On December 22, the American Petroleum Institute (API) said that the U.S. crude inventories have increased by 2.7 million barrels in the week to December 18. That increase is lower than the analysts’ expectations for a draw of around 3.2 million barrels. Stephen Innes, the Axi chief market strategist, said in a note:
“Rubbing salt in the oil market wounds today, oil prices lurched lower after yet another inventory build that was very much bearish to consensus.”
Oil markets also took a hit after the US President Trump threatened that he would not sign an $892 billion COVID-19 relief bill, stating that he wants Congress to increase the amount in the stimulus checks which lawmakers approved on December 21.
Coronavirus cases continued to increase in the US, with over a million new cases recorded in six days. Americans were advised against traveling for Christmas which also dampened the demand for fuel.