Oil climbs as U.S. inventory draw, Brexit deal hopes

Oil extended gains on Thursday in light holiday trade as a drop in the U.S. stockpiles spurred demand hopes, while hints of an imminent Brexit deal underpinned investors’ risk appetite.

Brent crude futures rose 17 cents, or 0.3 per cent, to $51.37 a barrel by 0745 GMT, while U.S. West Texas Intermediate crude increased 10 cents, or 0.2 per cent, to $48.22.

Both contracts gained more than two per cent on Wednesday.

“Lower U.S. inventories of crude and fuels as well as signs of a potential Brexit deal which led to weaker U.S. dollar were good news,’’ said Hiroyuki Kikukawa, General Manager of research at Nissan Securities.

“But lingering worries over a new variant of the novel coronavirus capped gains,’’ he said, adding that oil markets were quiet with investors in holiday mode.

The U.S. crude inventories fell by 562,000 barrels in the week to Dec. 18 to 499.5 million barrels, the Energy Information Administration said on Wednesday.

Gasoline stocks fell by a surprise 1.1 million barrels to 237.8 million barrels, the EIA said, while distillate stockpiles fell by a more-than-expected 2.3 million barrels to 148.9 million barrels.

Oil prices also drew support from news that Britain and the European Union were on the cusp of striking a narrow trade deal on Thursday, swerving away from a chaotic finale to the Brexit split.

The potential deal boosted sterling, which was up 0.2 per cent against the dollar after closing up 0.9 per cent.

A softer dollar makes commodities priced in the greenback more affordable for holders of other currencies.

“Risk appetite among investors improved also because of a rebound in global equities, which underlined that fears over a new variant of the coronavirus have receded a little,’’ said Satoru Yoshida, a commodity analyst with Rakuten Securities.

At least four drug-makers expect their COVID-19 vaccines will be effective against the new fast-spreading variant of the virus that is raging in Britain and are performing tests that should provide confirmation in a few weeks.

Still, some investors remain jittery about the recovery of oil demand as Americans were warned again not to travel for Christmas as the latest surge in cases overwhelmed hospitals.

On the supply side, the U.S. energy firms this week added oil and natural gas rigs for a fifth week in a row.

The oil and gas rig count, an early indicator of future output, rose two to 348 in the week to Dec. 23, energy services firm, Baker Hughes Co, said.