Oil prices recorded 1.8 per cent gains on Wednesday on the strength of expectations that U.S. crude inventories have dropped.
Industry group the American Petroleum Institute reported preliminary data that showed inventories fell by 7.4 million barrels last week, more than analysts expected.
Weekly U.S. industry and government reports were expected to show a 1.7 million-barrel crude draw for last week, analysts polled by Reuters said. Both data sets come late this week due to the New Year’s holiday.
U.S. West Texas Intermediate crude futures settled up 93 cents, or 1.8 per cent, at $53.26 per barrel.
Global benchmark Brent crude futures rose $1.02, or 1.8 per cent, at $56.49 a barrel by 5:43 p.m. ET (2243 GMT). The contract reached an 18-month high in the previous session, but a strong dollar has shaved off most of those gains.
Oil companies likely drew down inventories in the final week of the year for tax-related reasons, which could lead prices to spike after inventory data is released.
Both benchmarks recovered some losses from the previous day — when the U.S.-dollar hit a 14-year peak and knocked oil from 18-month highs — as the greenback dipped on Wednesday, making dollar-denominated fuel purchases in other currencies cheaper.
Oil Prices Rise, Fails to Hold Up
The price of crude oil on Tuesday predictably swung upwards on the strength of the implementation of the oil cut agreement by OPEC countries, but dropped momentum before the close of market.
International benchmark Brent crude was trading 2.5 percent higher at $58.13 per barrel by 0933 GMT, having hit a high of $58.35, its highest since July 2015, but traded down to close at $52.44.
U.S. West Texas Intermediate crude rose 2.3 per cent at $54.98 a barrel, after rising as high as $55.21, its highest since July 2015.
Moody’s Investors Service said in a press release that global oil and natural gas prices are expected to remain volatile again in 2017, but fluctuate within the $40-60 per barrel range, Moody’s Investors Service said in a press release on Tuesday.
The rating agency’s oil and natural gas price estimates — within a medium-term oil price band of $40-$60/bbl for both Brent and West Texas Intermediate (WTI) crude globally and in North America — remain unchanged for 2017-19 from its November 2016 update.
Moody’s expects prices to remain volatile within this band.
“In North America, the incoming Trump administration is expected to prioritize domestic oil and coal production, benefiting energy infrastructure projects in the short-term. Russia’s agreement to cut oil production is unlikely to hurt its oil companies, but Latin American companies will continue to face funding risk for several years due to tight market conditions,” said Moody’s.
The oilfield services and drilling sector will likely be constrained globally by weak demand, overcapacity and high debt levels, the release also said.