Oil Prices Retreat After Gaining 10% in January

Oil Prices Retreat After Gaining 10% in January

Oil prices eased on Thursday, pausing a rally that pushed prices up 10% since the beginning of the year. The crude oil market has rallied despite Omicron pressures but supply chain disruption in Libya and Kazakhstan helped push prices upward.

West Texas Intermediate crude for February delivery was last seen down US$0.49 to US$82.15 per barrel, while March Brent crude, the global benchmark, was down US$0.25 to US$84.42.

The drop follows on two days of rising prices as investors bet that demand will rise as the wave of new infections from the Covid-19 omicron variant is expected to peak while economic growth in North America and Europe remains robust.

Fatih Birol, executive director of the International Energy Agency, on Wednesday said demand is stronger than expected, raising expectations the agency will boost its demand forecast in its influential monthly report to be released next week.

The U.S. Energy Information Administration on Wednesday said U.S. oil inventories fell for the seventh-straight week, dropping by a more than expected 4.5 million barrels, adding to the buoyant demand outlook, though rising gasoline inventories may show the picture is weaker than expected.

“Crude oil stocks have been reduced by a good 20 million barrels in the past seven weeks, putting them at their lowest level since October 2018.

“That said, this was countered by another sharp rise in gasoline stocks by 8 million barrels, which means that gasoline stocks have increased by around 18 million barrels within two weeks.

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“This is due to a slump in gasoline demand to below 8 million barrels per day. The last time it was any lower was during the February 2021 cold snap. This raises certain doubts about the IEA director’s optimistic remarks about demand trends,” Commerzbank analyst Carsten Fritsch said in a note.

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