U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher as optimism over the rate of U.S. vaccinations raised demand expectations. Perhaps keeping a lid on prices was uncertainty surrounding how much supply OPEC+ will restore to the market at its Thursday meeting and a big build in U.S. crude inventories.
Vaccination-Driven Demand Expectations
Optimism over increased U.S. demand is helping to boost crude oil prices after President Joe Biden pledged to make more vaccinations available sooner than expected.
The U.S. will have enough COVID-19 vaccine for every American adult by the end of May, President Joe Biden said on Tuesday after Merck & Co agreed to make rival Johnson & Johnson’s inoculation.
“Ongoing stimulus measures, as COVID-19 vaccinations speed up, have boosted sentiment,” ANZ analysts wrote in a note.
Concerns Over Size of OPEC+’s Easing of Production Cuts
Crude oil futures are recovering from a setback the previous session caused by uncertainty over how much supply OPEC+ will restore to the market at its Thursday meeting.
The OPEC+ meeting on Thursday comes at a time when producers are generally positive on the oil market outlook compared with a year ago when they slashed supply to boost prices.
The market widely expects OPEC+ to ease production cuts, which were the deepest ever, by about 1.5 million barrels per day (bpd), with OPEC’s leader, Saudi Arabia, ending its voluntary production cut of 1 million bpd.
Reuters reported that an OPEC+ technical committee document reviewed by Reuters called “for cautious optimism,” citing “the underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise”.
American Petroleum Institute Weekly Inventories Report
The API reported late Tuesday a build in crude oil inventories of 7.356 million barrels for the week-ending February 26. Analysts were looking for an inventory draw of 928,000 barrels for the week.
The API also reported a massive draw in gasoline inventories of 9.933 million barrels for the week-ending February 26 – after the previous week’s 66,000-barrel build. Analysts had expected a 2.300-million-barrel draw for the week.
Distillate stocks saw a large decrease as well, of 9.053 million barrels for the week, after last week’s 4.489-million-barrel decrease.
While crude inventories are up this week, U.S. oil production fell 1.1 million barrels per day to 9.7 million bpd, according to the Energy Information Administration (EIA).
The EIA will release its weekly inventories report at 15:30 GMT on Wednesday. It is expected to show a 1.3 million barrel draw in crude oil. The report is not expected to move the market very much unless there is a major miss. Most traders will be shifting their focus to the March 4 OPEC+ output decision.
For a look at all of today’s economic events, check out our economic calendar.