Oil prices have reasons to rise today as markets are pricing in forecasts for a decline of US crude stocks, a change of fortune after a worrying build-up the week before.
Traders have been worrying that the trend of crude inventories being relieved had changed due to lower demand, but another round of stock draws helped the market sit more comfortably.
The draw needs to be confirmed by official data from EIA and should this happens, prices are likely to benefit.
Looking eastwards, the market has been trimming prices lately due to worries that demand in China is under threat. Infection numbers have been rising and fuel consumption prospects during the Lunar New Year holiday were bleak.
However, oil prices are benefiting today from official numbers that show a drop in new infections in China, a relief for the market that will be increasingly priced in if the declining trend continues.
There is always a slight doubt over official infection figure from China but traders have to trade on reported facts and fewer infections from one of the world’s largest oil consumers is always a good sign.
Last but not least, the oil world is expecting today the details of a coming round of executive orders by President Biden, that will affect future oil production in federal lands.
The expectation is that new leases for oil and gas in federal territory may be halted and the market is waiting for details and duration. Such a development – still without official details yet – was not totally unexpected but it’s always a shocker for the oil world.
Banning new oil and gas leases in federal ground will affect hydrocarbon production going forward but the effect will not be immediately felt in markets, so prices -even if they take an initial hit on the news – should return back to where they were.
Production from new leases would only come in years going forward, as a lease ban and a drilling permit ban are two different things and many firms have already secured drilling permits to keep busy for the near future.
