Crude oil futures prices resist bearish EIA data amid vaccine cheer

Singapore — 0314 GMT: Crude oil futures rose during midmorning Asia trading Dec. 10 as COVID-19 vaccine momentum kept the market afloat amid a host of bearish developments, including a data release from the US Energy Information Administration that showed large increases in both crude and product inventories.

At 11:14 am Singapore time (0314 GMT), the ICE February Brent contract was up 24 cents/b (0.49%) from the Dec. 9 settle at $49.10/b while the NYMEX January light sweet crude contract was up 31 cents/b (0.68%) at $45.83/b. Both markers remained rangebound Dec. 9, with the ICE February Brent contract rising 0.04% and the NYMEX January light sweet crude contract falling 0.18%.

The market seems to have largely overlooked bearish data from the EIA, which showed a 15.19 million-barrel build in crude inventories in the week ended Dec. 4. This was the largest weekly build since the week ended April 10, and pushed inventories to nearly 11% above the five-year average, opening the widest supply overhang since late September.

The build came as a surprise to analysts, who told S&P Global Platts earlier that they were expecting crude inventories to decline by 700,000 barrels in the period.

The EIA report also showed that gasoline inventories climbed 4.22 million barrels at 237.86 million barrels and distillates stocks climbed 5.22 million barrels at 151.09 million barrels.

Underscoring these indications of weak downstream demand was data showing that implied gasoline demand had plummeted 370,000 b/d at 7.6 million b/d -- the weakest since the week ended May 29. Apple Mobility Index data accessed by Platts showed that US driving activity in the week ended Dec. 4 was at the lowest since the week ended May 22.

Market analysts said the resistance shown by the crude markets is due to overpowering vaccine optimism, especially following the distribution of the Pfizer-BioNtech vaccine in the UK on Dec. 8, and as a US Food and Drug Administration advisory committee is expected to convene Dec. 10 to discuss the vaccine's Emergency Use Authorization.

"Crude prices are resisting a big slump that would have normally been caused by the EIA data that we saw, and that has left quite a few people scratching their heads. But what we are seeing today is that the vaccine cheer has taken on such a huge momentum that is overriding pretty much all other bearish signals," Vandana Hari, CEO of Vanda Insights, told Platts on Dec. 10.

"There are a host of other bearish developments as well, including the worsening pandemic situation in the US, the stalemate on the stimulus, and even the creeping up of the dollar over the past couple of days but it just seems that none of them are strong enough to counter the positive sentiment brought about by the vaccines," Hari added.

"Considering how bearish the [EIA] report was, the oil-price sell-off was limited. Optimism over the vaccine prevails and continues to limit any serious downside action," Stephen Innes, chief global strategist at Axi, wrote in a Dec. 10 note.

Meanwhile, reports surfaced about an explosion at two oil wells in Iraq, with some market analysts saying that a reaction to this news may have supported oil prices early Dec. 10.

"Given the big factors that are at the center stage for oil, such as vaccines and stimulus, a small explosion in two wells would have probably more or less flown under the market's radar," Hari added.