On Wednesday, oil prices rose to two-month highs due to constrained supply, as petroleum stocks in the United States, the world’s largest consumer, fell to their lowest level since 2018, the dollar weakened and concerns over the Omicron variant of the COVID-19 virus faded.
Last week, oil stockpiles in the United States declined 4.6 million barrels to 413.3 million barrels, the lowest level since October 2018, according to the Energy Information Administration. In a Reuters poll, analysts predicted a 1.9 million-barrel reduction.
“Despite a significant decline in refining operations, the crude draw was larger than predicted,” said Matt Smith, head oil analyst for the Americas at Kpler, a data business.
Brent crude futures closed at $84.67 a barrel, up 95 cents, or 1.1 percent. WTI crude futures in the United States were up $1.42, or 1.8 percent, at $82.64.
According to Kpler’s Smith, the weakening dollar was the primary cause of increasing oil prices, surpassing even the EIA draw. Oil contracts priced in dollars are cheaper for holders of foreign currencies as the dollar weakens.
After statistics revealed that consumer prices in the United States grew steadily in December, the dollar plummeted to a new two-month low against a basket of currencies.
Brent was in backwardation, with front-month delivery roughly $4.41 more costly than six-month delivery, signalling constrained supply in the near term.
Crude stockpiles in the United States have fallen for seven weeks in a row and the global inventories have been tightening as major producers struggle to expand supply even as consumption climbs amid rising cases of Omicron.
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