OIL FUTURES: Crude extends rally on US inventory draw, easing omicron fears

Crude futures settled higher for a second session, propelled by a larger-than-expected US inventory draw and easing pandemic concerns.

NYMEX February WTI settled $1.64 higher at $72.76/b and ICE February Brent climbed $1.31 to settle at $75.29/b.

US commercial crude inventories declined 4.72 million barrels to 423.57 million barrels in the week to Dec. 17, Energy Information Administration data showed Dec. 22. The draw pushed stocks more than 8% below the five-year average for this time of year — the tightest since mid-September.

The draw exceeded market expectations. American Petroleum Institute data released late Dec. 21 showed US crude stocks fell 3.7 million barrels in the week ended Dec. 17, while analysts S&P Global Platts surveyed Dec.20 had pointed to a 3.9 million barrel draw over the period.

US refinery net crude inputs rose 1% to 15.82 million b/d, the strongest since the week ended Aug. 27.

NYMEX January RBOB settled up 1.58 cents at $2.1680/gal and January ULSD climbed 5 cents to $2.3078/gal.

US gasoline stocks surged 5.53 million barrels to an 11-week high of 224.12 million barrels. It was the largest one-week build since the week ended June 4, when stocks climbed 7.05 million barrels, but still left inventories around 4% below the five-year average for this time of year.

The build comes as total product supplied for gasoline, EIA's proxy for demand, plunged 490,000 b/d to 8.99 million b/d, falling behind the five-year average for the first time since the week ended Sept. 17.

Total product supplied for all products fell 2.74 million b/d to 20.45 million b/d, retreating from an all-time high the week prior.

Crude prices were already trending higher overnight amid optimism that the recent surge in coronavirus omicron infections in the US and UK would not lead to new lockdowns.

US President Joe Biden said Dec. 21 the government will provide a half-billion test kits to American households, ramp up hospital support and create more pop-up vaccination sites, while ruling out lockdowns in the leadup to Christmas.

"If we're not going to lock down the economy and omicron peaks, then the selloff that we've seen in the oil market in recent weeks is obviously way overdone," Price Futures Group analyst Phil Flynn said in a note. "In fact, if you look at the early indication of oil inventories, they are tightening around the globe and that trend should accelerate in the coming weeks."

UK Prime Minister Boris Johnson similarly said Dec. 21 that the country will not see additional lockdown measures, at least before Christmas.

"Oil markets remain keenly focused on the potential demand impact of the virus," TD Securities analysts said in a note. "Nonetheless, there has been minimal impact as of yet, with flight tracking data showing no material drop in total flights while falling case counts in South Africa also offer some optimism."