(New York) Oil prices continued to rise on Wednesday, still encouraged by the possibility of a production cut by the Organization of the Petroleum Exporting Countries (OPEC) and their allies in the OPEC + agreement.
The price of a barrel of Brent from the North Sea, for delivery in January, which was the last day of trading, ended up 2.89%, at 85.43 dollars.
The barrel of American West Texas Intermediate (WTI), also with maturity in January, gained 3.00%, to 80.55 dollars.
“Operators see two elements of support” in the days to come, namely “OPEC’s decision”, which could opt for a further reduction in production, at its meeting on Sunday, and the difficulties of the European Union to agree on a ceiling price for Russian oil, explained Edward Moya, of Oanda.
For Stephen Schork, analyst and author of the Schork Report, several technical indicators “signal that the supply is overabundant”.
For several days, Brent has been, like WTI a few days earlier, in a so-called contango situation, which means that oil purchased for close delivery, i.e. in January, is cheaper than the crude offered for February.
This atypical situation most often reflects a short-term imbalance between supply and demand, which generally results from a slump in appetite for black gold, currently observed with the slowdown in the global economy.
The gap between the two contracts on Wednesday reached its highest level since May 2020, in the first weeks of the coronavirus pandemic.
Several US indicators released Wednesday, in particular the ADP report on employment in November and the PMI index of activity in the Chicago area, came out significantly below expectations.
“There is a concern about a possible economic contraction,” said Stephen Schork, “whether in North America or in China with the health restrictions. This increases the likelihood of OPEC cutting production, and the market is pricing it in.
Uncertainty continued to weigh on the Russian oil price cap mechanism, promoted by the United States but on which the European Union cannot agree, 5 days before the entry into force of the European embargo.
In the absence of an agreement, recalled Edward Moya, the provisions which were to allow, in compliance with the ceiling price, European carriers and insurers to deal with Russian oil despite the embargo could not apply.
The risk would then be to see the Russian volumes exported melt away, which would reduce supply and push prices up.
Last element of price support, the sharp drop of 12.6 million barrels of commercial inventories last week, reported on Wednesday by the US Energy Information Agency (EIA).
This unexpected plunge is partly explained by the jump in the refinery utilization rate, to 95.2% (compared to 93.9% a week earlier), a level that the United States had not experienced for more than three years.
“With the high margins” offered by refined products compared to crude prices, “refiners are really revving up”, commented Andrew Lebow, of Commodity Research Group, who said he was surprised by the 16.6 million barrels delivered daily to refineries, significantly higher (+6%) than last year’s level at the same time.