Oil rose for a fifth day — the longest run of gains since May — as a surprise drop in US crude stockpiles and a weaker dollar provided more impetus to a rally that’s been driven by vaccine breakthroughs.
Futures in New York climbed as much as 0.5% in early Asian trading to approach $46 a barrel. American oil inventories fell 754,000 barrels last week, according to Energy Information Administration data, compared with the median analyst estimate for a 225,000 barrel build. A dollar index fell, taking its decline this month to 2.5%, boosting the appeal of commodities priced in the currency.
Crude has jumped around 28% in November as signs Covid-19 vaccines could be rolled out within weeks improved the energy demand outlook. The rally has reshaped the oil futures curve, with several key markers moving into a bullish backwardation structure in recent days. Chinese and Indian refiners, meanwhile, issued a flurry of tenders seeking crude oil for loading in January, highlighting the strong demand coming from parts of Asia.
The rapid price gains pose a headache for OPEC+ ahead of next week’s meeting to evaluate the group’s output strategy. In the latest sign of growing rifts within the cartel, Iraq’s deputy leader said that OPEC should take members’ economic and political conditions into account when deciding production quotas rather than adopting a “one-size-fits-all” approach.
The EIA report also showed a decline in inventories at the storage hub in Cushing, Oklahoma and the 10th straight draw in distillate supplies. But there were some bearish data points: gasoline stockpiles rose over 2 million barrels and oil production ticked higher.
West Texas Intermediate prices for 2021 were at their strongest level since March on Wednesday, while those for 2022 were at their highest since September. The higher forward prices are boosting the incentive for oil producers to lock in their supplies for the coming years. Prices have also been supported by renewed geopolitical tensions, with recent attacks on a fuel depot in the Saudi Arabian city of Jeddah and on an oil tanker in the Red Sea.