Oil Prices Rise As U.S. Gasoline Supplies Decline; Economic Concerns Loom

Oil prices increased over 1% on Thursday following the greatest two-day decline for the first two trading days of the year in three decades, with U.S. data indicating lower fuel inventories providing support and economic concerns limiting gains.

Concerns of a global recession precipitated huge declines over the previous two trading days, especially in the aftermath of negative short-term economic data in the world's two largest oil consumers, the United States and China.

According to data issued by the U.S. Energy Information Administration on Thursday, distillate inventories declined more than anticipated when a winter storm struck the United States at the end of December.

Last week, the Energy Information Administration reported a fall in gasoline stocks of 346,000 barrels, whereas a Reuters survey had projected a decrease of 486,000 barrels.

According to EIA data, distillate stockpiles, which comprise diesel and heating oil, declined by 1,4 million barrels during the previous week, contrary to the predicted decrease of 396,000 barrels.

John Kilduff, a New York-based partner of Again Capital LLC, stated, "The consequences of the hurricane during that time period are clear here."

Futures for Brent crude closed at $78.69 a barrel, up 85 cents, or 1.1%. The price per barrel of West Texas Intermediate crude oil in the United States climbed by 83 cents, or 1.2%, to $73.67.

According to data from Refinitiv Eikon, Tuesday and Wednesday's cumulative losses of more than 9 percent were the greatest two-day losses at the start of the year since 1991.

The largest U.S. pipeline operator, Colonial Pipeline, published a statement earlier in the session suggesting that its Line 3 had been shut down for unscheduled maintenance, with a resume date of January 7 predicted for the products line.

Tamas Varga, an oil dealer at PVM, linked the early-session price surge to the pipeline interruption and remarked, "The market is unquestionably in a bear market."

The contracts for the two proximate benchmarks traded at a discount to the following month, a phenomenon known as contango.

On Wednesday, statistics indicating a steeper decrease in U.S. manufacturing in December weighed on prices, along with fears of economic disruption as COVID-19 makes its way through China, where travel and activity restrictions have been substantially lifted.