Crude oil prices and crude ETFs are surging on Wednesday, after industry data revealed that U.S. oil inventories fell more than anticipated. The Organization of the Petroleum Exporting Countries (OPEC) also lifted its projections for oil demand.
The U.S. Benchmark, West Texas Intermediate (WTI) crude futures, rocketed $2.85, or 4.72%, to $63.44 a barrel, before paring gains slightly on Wednesday.
Analysts were unsure of the future direction for crude on Tuesday, as the market has been in consolidation for nearly a month, trading between $57 and $62 a barrel before breaking out on Wednesday.
“Prices are still locked in a sideways limbo, as bearish Covid-19 developments in some countries compete against bullish economic data and spending projections going forward in US and China,” Rystad Energy analysts said on Tuesday.
Morgan Stanley, meanwhile, said in a new note that it anticipated prices to remain range-bound through the end of the summer, at between $65 and $70 per barrel for Brent.
Oil price gains over the past week have been driven by signals of a strong economic recovery in China and the United States, but have been limited by worries over halts in vaccine rollouts worldwide and spiking coronavirus infections in nations like India and Brazil.
Despite the concerns, OPEC adjusted its forecast on Tuesday for world oil demand growth this year. The cartel is predicting demand to climb by 5.95 million barrels per day (bpd) in 2021, up by 70,000 bpd from its forecast last month. The cartel is counting on the pandemic resolving itself and travel restrictions to ease, leading to an uptick in travel and additional consumption of fuel, and therefore oil.
“It was a welcome prognosis by the market, which had been fretting about the impact the ongoing pandemic was having on demand,” ANZ Research analysts said in a note.
Further supporting the market on Wednesday, sources said data from the American Petroleum Institute revealed that crude stocks dropped by 3.6 million barrels in the week ended April 9, in contrast with estimates for a decline of about 2.9 million barrels from analysts polled by Reuters.
For investors looking for crude ETFs to play the run-up in oil, which has been fairly steady since November, the United States 12 Month Oil Fund (USL) and the iPath Pure Beta Crude Oil ETN (OIL) are two funds to consider.
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