Oil shrugs off US stockpile to rise on vaccine optimism

New York

OIL rose toward US$46 a barrel after shrugging off a massive increase in US crude stockpiles on optimism that vaccine rollouts will lead to a swift improvement in global energy demand next year.

The Energy Information Administration reported a 15.2 million barrel jump in American oil inventories, the second-biggest on record.

While prices dropped on the data, they retraced most of their losses with some support from a falling dollar to close down just 0.2 per cent on Wednesday. A militant attack on the Khabbaz field in Iraq had aided crude earlier in the session.

Oil rose Thursday even as Asian stocks tracked Wall Street lower on the lack of US stimulus. Canada became the latest country to approve a Covid-19 vaccine and Chicago said it will offer vaccines free of charge to all adult residents next year.

Asian physical demand, meanwhile, looked set to remain strong for another month amid early buying by Chinese and Indian refiners.

Oil has fallen this week, but remains near a nine-month high, as the market holds out for vaccine deployments to spur the next leg of the demand recovery.

While concerns about near-term consumption are still weighing on sentiment as governments reimpose restrictions, the oil futures curve is signalling investors are fairly comfortable about the outlook for next year. The EIA report also showed crude exports fell to the lowest since October 2018, helping bring the US back to being a net petroleum importer for the first time since September.

Meanwhile, distillate stockpiles, which had been declining at a fairly steady clip, rose the most since May as diesel demand fell. Brent's prompt timespread was 8 US cents a barrel in backwardation, a bullish signal where near-dated contracts are more expensive than later-dated ones. The spread was 48 US cents in contango at the end of October. BLOOMBERG