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OIL FUTURES: Crude prices extend rally after bullish US inventory data

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OIL FUTURES: Crude prices extend rally after bullish US inventory data

Highlights

US crude, oil products inventories decline

US crude production hits 2021 high, more growth expected

Crude oil futures extended their rally Dec. 29 on a rollercoaster day for prices after the US government data showed falling inventories of crude and refined products.

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The mixed bag day for prices saw oil futures start out with a decline and then spike on the US Energy Information Administration's inventories report. Prices then dipped again only to rebound later in the day.

NYMEX February WTI increased 58 cents to settle at $76.56/b, and ICE February Brent rose 29 cents to settle at $79.23/b, after crossing the $80/b threshold earlier in the trading day.

NYMEX January RBOB jumped 2.46 cents to settle at $2.2717/gal, and January ultra low sulfur diesel climbed 64 points at $2.3778/gal.

US crude oil inventory declines extended in the week ended Dec. 24 as refinery demand remained high and production ticked back up, EIA data showed Dec. 29.

Commercial crude inventories declined 3.6 million barrels to 420 million barrels in the week ended Dec. 24, the EIA said, pushing stocks 7% below the five-year average for this time of the year -- the tightest since mid-September.

A 4.3-million-barrel decline in US Gulf Coast inventories comprised the bulk of the draw, which was offset only slightly by small gains on the US East Coast and Midwest inventories.

However, COVID-19 cases hit new records. Because of the rapid spread of the omicron variant, daily US COVID-19 cases on Dec. 18 hit a new record high, according to data from Johns Hopkins University.

While hospitalization cases also are rising, the overall hospitalization and death rates may not spike as much because early evidence points to omicron causing less severe disease than its delta counterpart, according to government and health officials.

Also, the US Centers for Disease Control and Prevention reduced the recommended isolation time for COVID-19 infected individuals to five days from 10 days.

"Although omicron cases in the US and Europe among others, continue to surge, it has yet to make its presence felt negatively in economic data," OANDA Senior Market Analyst Jeffrey Halley said Dec. 29.

The major US stock market indexes also saw small gains Dec. 29.

Trading volumes were expected to remain thin for the remainder of the week, with most market participants away for holidays.

US crude production rose to a 2021 high of 11.8 million b/d for the week ended Dec. 24, the EIA said.

US oil and gas producers said they aim to increase production in 2022, but expect to face significant cost pressures and ongoing investment challenges, according to industry executives surveyed by the Federal Reserve Bank of Dallas in December.

Nearly half of the executives surveyed said growing production was their company's primary goal in 2022, while 15% are aiming to maintain steady output, and 13% want to reduce debt.

Most executives expected their company's capital spending to rise in 2022 compared with 2021, with 44% saying they see the budgets increasing slightly year on year while another 31% expect a significant increase.

The Dec. 29 report contained responses from 134 energy companies in the Dallas Fed's 11th District, which include Texas and much of New Mexico and Louisiana.