22.12.202223:48 Forex Analysis & Reviews: Oil under pressure again due to the likelihood of lower demand

Oil prices went down on Wednesday evening, although it was steadily rising during the day.

At the time of writing, Brent crude for February delivery as of 6:27 pm London time was $81.64 per barrel, which was 0.68% lower than the previous session's closing price, on the London ICE Futures Exchange. The West Texas Intermediate (WTI) by that time stood at $77.90 a barrel, or 0.50% below yesterday's close, on the New York Mercantile Exchange.

News about a sharp decline in official U.S. crude stocks boosted the commodity market. Market hopes for China's reopening after a prolonged quarantine also contributed to the price growth. The rise in quotes could have been even more significant, but forecasts pointing to a winter storm moving towards North America have spoiled the whole picture. Severe weather, as everyone knows, can lead to a decrease in transport activity. The market is particularly affected by this decline on Christmas Eve and in the midst of it.

U.S. crude-oil inventories fell 5.9 million barrels in the week ended Dec. 16, the U.S. Department of Energy said on Wednesday. This happened amid quite stable production (12.1 million bpd) and considerable reduction of net imports, namely by 1.1 million bpd. By the way, experts had expected a more modest reduction - only by 2.5 million bpd.

A relatively large 3.6-million-barrel transfer of crude-oil last week from the nation's Strategic Petroleum Reserve to the commercial side, as we understand it, was clearly insufficient to compensate for the shortage of oil in the country. Cumulatively, oil reserves in the United States fell by 9.5 million barrels.

The shutdown of the Keystone pipeline may have been the reason for this decline in imports. All the same, this pipeline in its working days was pumping about 620,000 barrels a day - from Canada to the coast of the Gulf of Mexico. According to the pipeline operator TC Energy, the damaged section has been cut out and sent for testing. Once repairs occur, the pipeline could be restarted. But the problem is that no one knows when it will be reopened. There is a possibility that the pipeline will be idle for several more weeks.

Refinery input against this backdrop dropped to its lowest levels in seven weeks. And, most interestingly, petroleum reserves continue to grow against this backdrop: gasoline inventories rose by 2.5 million barrels. At the same time, distillate fuel inventories symbolically decreased by 0.2 million barrels.

The cost of dollars also affects oil quotes. The currency market leader rose against the euro on Thursday following the release of the final U.S. GDP data.

As of 18:56 London time, the euro was falling against the dollar to 1.0586 from the last closing level of 1.0603. Prior to the release of data, the euro appreciated against the dollar to about 1.063. At the same time the dollar/yen exchange rate declined to 132.36 (from 132.47). The dollar index, i.e. the exchange rate of the dollar against a basket of six other currencies, was rising during the evening by 0.01%, to 104.52 points.

So, according to the third and final estimate of the US Department of Commerce, the country's GDP increased by 3.2% in the third quarter. The first estimate implied a 2.6% increase in the U.S. economy, the second was a 2.9% increase. The main conclusion of the report is that the economic growth in Q3 was stronger than analysts expected, and that's why the country's central bank was raising rates so aggressively.