Oil prices rose almost 1% on Thursday after a fall in U.S. stockpiles added further support following the unilateral decision by Saudi Arabia, the world’s biggest exporter, to cut output over the next two months.
It was not immediately clear how the storming of the U.S. Capitol by supporters of President Donald Trump would impact oil markets, although some analysts believe President-elect Joe Biden’s administration will clamp down on U.S. oil production.
Brent crude was up 44 cents, or 0.8%, at $54.74 a barrel by 0734 GMT, after gaining 1.3% overnight. U.S. West Texas Intermediate (WTI) gained 51 cents, or 1% to $51.14. The contract rose 1.4% on Wednesday.
Saudi Arabia, the world’s biggest oil exporter, said it would voluntarily cut 1 million barrels per day (bpd) of output in February and March, after OPEC+, which groups the Organization of the Petroleum Exporting Countries and other producers, including Russia, met earlier this week.
“WTI crude seems poised to rise higher as the Biden administration will clamp down on U.S. crude production, the Saudis tentatively alleviated oversupply concerns with their 1-million bpd cut present, and as the dollar’s days seem numbered,” said Edward Moya, senior market analyst at OANDA.
A lower dollar, which makes oil cheaper because the commodity is mostly traded using the greenback, is also supporting prices, analysts said.
U.S. crude stocks dropped and fuel inventories rose, the Energy Information Administration said on Wednesday. [EIA/S]
Crude inventories were down by 8 million barrels in the week to Jan. 1 to 485.5 million barrels, against a Reuters poll showing analysts expected a 2.1 million-barrel decline.
The drop in crude stocks is a typical year-end occurrence as energy companies take oil out of storage to avoid tax bills.
A sustained rise in WTI prices, though, may result in a resurgence in U.S. output.
Trump supporters swarmed the U.S. Capitol on Wednesday, sending it into lockdown, as Vice President Mike Pence refused a demand from the president to cancel his loss to President-elect Biden. Police have declared the situation secure and the certification of the election result has resumed.
“I’m not sure it changes anything fundamentally but what everyone will be looking at is how the equity markets react, as well as the U.S. dollar,” said Matt Stanley, senior broker at Star Fuels in Dubai.
“It can be argued that oil has been happy to ride along with the equity market.”
Reporting by Aaron Sheldrick; Editing by Jacqueline Wong and Tom Hogue