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US Crude Slumps Despite Larger-Than-Expected Supply Drawdown

Crude oil futures joined the decline in the broader financial markets. Despite the US government reporting a much larger-than-expected fall in domestic inventories, oil prices failed to generate momentum. It might have been a session of choppy trading, but market analysts believe that crude could restart its rally soon following this week’s supply data and the improving coronavirus situation in China.

March West Texas Intermediate (WTI) crude oil futures dipped $0.08, or 0.15%, to $52.53 per barrel at 19:47 GMT on Wednesday on the New York Mercantile Exchange. US crude prices have slumped about 1.4% over the last several sessions, paring their strong start to 2021 to below 9%.

Brent, the international benchmark for oil prices, is also trading in the red in the middle of the trading week. March Brent crude futures shed $0.31, or 0.56%, to $55.22 a barrel on London’s ICE Futures exchange. Brent has fallen nearly 1% over the last week, lowering its January gain to under 7%.

According to the US Energy Information Administration (EIA), domestic stockpiles decreased by 9.9 million barrels for the week ending January 22. The market had penciled in a drop of 1.7 million barrels.

Oil inventories at the Cushing, Oklahoma storage hub fell by 2.3 million barrels. Gasoline supplies increased by 2.5 million barrels, while distillate stockpiles tumbled by 800,000 barrels.

Despite the positive data, it was not enough to spur a substantial rally. Market analysts are attributing the lackluster performance to “headwinds from an accelerating flight from risk-on assets,” says Matt Smith, director of commodity research at ClipperData. Although the Federal Reserve guaranteed stimulus support, it was not enough for investors to pour into equities.

Meanwhile, crude prices had endured a bit of a pullback due to concerns over the increasing number of new coronavirus cases in China. The central government imposed various lockdowns and new restrictions on about 30 million people. However, the health authorities confirmed that the number of infections fell to the lowest level in more than two weeks.

This is critical news for crude markets since China is one of the world’s largest oil consumers.

In other energy commodities, March natural gas futures advanced $0.051, or 1.93%, to $2.687 per million British thermal units (btu). March gasoline futures dipped $0.009, or 0.57%, to $1.5658 a gallon. March heating oil futures edged up by $0.0051, or 0.32%, to $1.6035 per gallon.

If you have any questions and comments on the commodities today, use the form below to reply.


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source https://www.earnforex.com/commodities/us-crude-slumps-despite-larger-than-expected-supply-drawdown/

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