Brexit cheer and lower US stocks lift oil

Tokyo  — Oil extended gains on Thursday as a drawdown in US stockpiles of crude and petroleum lifted demand hopes, while investors also cheered a potential Brexit trade deal.

US West Texas Intermediate (WTI) crude futures rose 18c, or 0.4%, to $48.30 a barrel by 1.24am GMT, while Brent crude futures climbed 20c, or 0.4%, to $51.40.

Both contracts gained more than 2% on Wednesday.

“Oil markets are quiet as all investors are in a holiday mode,” said Hiroyuki Kikukawa, GM of research at Nissan Securities.

“Lower US inventories of crude and fuels as well as signs of a potential Brexit deal which led to a weaker US dollar were good news, but lingering worries over a new variant of the novel coronavirus capped gains,” he said.

US crude inventories fell by 562,000 barrels in the week to December 18 to 499.5-million barrels, the Energy Information Administration said on Wednesday.

Petroleum stocks fell by a surprise 1.1-million barrels to 237.8-million barrels, the EIA said, while distillate stockpiles fell by a more-than-expected 2.3-million barrels to 148.9-million barrels.

Oil prices also drew support from news that Britain and the EU were on the cusp of striking a narrow trade deal on Thursday, swerving away from a chaotic finale to the Brexit split.

The potential deal boosted sterling, which was up 0.13% against the dollar after closing up 0.9%. A softer dollar makes commodities priced in the greenback more affordable for holders of other currencies.

Still, investors remain jittery about the recovery of oil demand as a more contagious variant of the coronavirus that is quickly spreading across Britain prompts countries to shut their borders to the UK.

Americans were also warned again not to travel for Christmas as the latest surge in cases overwhelmed hospitals.

Raising concerns over a supply glut, US energy firms this week added oil and natural gas rigs for a fifth week in a row.

The oil and gas rig count, an early indicator of future output, rose by two to 348 in the week to December 23, energy services firm Baker Hughes said.

Reuters