The prices of oil surged on January 27, 2021, after the latest data showed an unexpected decline in US crude stockpiles. China also reported its lowest daily rise in COVID-19 cases which might have also underpinned the price of oil.
Whenever the health crisis seems to get under control, the market sentiment turns positive resulting in a rise in prices. On the other hand, when the pandemic worsens, the markets tumble, with most investors expecting severe measures to be put in place to curb the spread.
In the latest instance, the Brent crude futures gained 19 cents, translating to 0.3%, to trade at $56.10 a barrel. On the other hand, the US West Texas Intermediate (WTI) crude futures gained 20 cents or 0.4% to reach $52.81 per barrel.
Based on reports from the American Petroleum Institute (API), crude oil inventories in the US dropped by about 5.3 million per barrel, which is the opposite of analysts’ prediction of a build of around 430,000 barrels.
ING Economics said in a note:
“Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines.”
With China’s infection rate decreasing, investors are less worried about the decline in traveling during the Lunar New Year in China. The COVID-19 vaccine rollout is gathering momentum in the US and the rest of the world which means that lockdowns might soon become things of the past. If the pandemic is brought into control entirely, oil prices will recover considerably.