Oil’s big price increase doesn’t last long
Crude prices, boosted by rising demand and a potentially successful COVID-19 vaccine, soared Wednesday to their highest level in more than two months after inventories declined more than expected.
The price spike didn’t last, however, as fears of renewedlockdowns in the face of the resurgent virus left the U.S. benchmark to settle at $41.42, a 9 cent gain.
Earlier, West Texas Intermediate reached $43.06, up 3 percent after the Energy Department said crude stockpiles fell by 8 million barrels during the last week of October and are expected to be 3 million barrels lower over the past week, according to an estimate by S&P Global Platts. That followed a price jump Monday,
when Pfizer said its coronavirus vaccine was 90 percent effective in preventing the disease caused by the coronavirus.
“Enthusiasm (over the vaccine trials) is driving (crude) prices to their highest level in 10 weeks,” Rystad, a Norwegian energy research firm, said in a research note early Wednesday. “Vaccine news, followed by an indication that US crude stockpiles fell more than expected for another week, assisted prices to climb further for a third consecutive day.”
The prospect of a longlasting rise in oil prices could be snuffed out by soaring coronavirus cases around the world, prompting another round of economic shutdowns. The U.S. has recorded more than 1
million new coronavirus cases this month, and several states including New York and Wisconsin are weighing additional restrictions on businesses and travel to slow the virus’ spread.
“Acceleration in demand will not happen just because of positive news from vaccine trial results,” Rystad said. “It’s the lockdowns that must succeed in bringing spiraling COVID cases under control.”
For the time being, however, demand for crude has been on a steady rise after a national lockdown was lifted in April. Most U.S. oil producers have restarted production as crude prices climbed above $40 a barrel.
The rising demand helped cut the national crude supply to 484.4 million barrels, about 7 percent higher than the fiveyear average for this time of year, the Energy Depart
ment said.
U.S. refineries processed an average of 13.6 million barrels of crude oil per day in the week ending October 30, an increase of 163,000 barrels per day compared
to the previous week, according to the Energy Information Administration’s report. Refineries operated at about 75 percent of their capacity.
While most petroleum
products saw an uptick in demand last week, gasoline demand fell as the summer driving season ended. Gasoline inventories rose by 1.5 million barrels during the last week of October and are still about 4 percent above the five-year average for this time of year. Gasoline supply this past week is expected to to fall by 600,000 barrels, according to S&P Global Platts.
Refineries are feeling the squeeze as demand for petroleum products remains slow to recover after the pandemic swept the nation in March, the EIA said.
“The Gulf Coast is the largest refining region in the country and has been affected by a particularly active storm season this year,” the Energy Information Administration said in a report this week.
Nine refineries have closed this year and six more could be shut down, global energy research firm IHS Markit said.