Technical rebound for oil in a market that remains depressed

Oil prices rebounded this Thursday after two days of sharp falls, driven by purchases at a good price and problems in an oil pipeline in the eastern United States.

Although the market remains bearish on the demand for crude oil, the price of a barrel of Brent from the North Sea for delivery in March gained 1.09% closing at 78.69 dollars in London. Meanwhile, the barrel of West Texas Intermediate (WTI) for February rose 1.13% quoted at 73.67 dollars in New York.

The Mexican export mix rose 1.31% to $62.47 a barrel, according to data from Petróleos Mexicanos.

It is only a technical rebound, after the losses of the first days of the year”, summarized Andrew Lebow, of Commodity Research Group.

On Tuesday and Wednesday, WTI fell more than 9% and touched a low in more than a year.

For the analyst, the suspension of operations in an oil pipeline between Greensboro, North Carolina and Linden, New Jersey, influenced the bullish behavior of the day.

The decision to halt operations came after a leak near Danville, Virginia. Only on Saturday will the pipeline be operational again.

The market paid little attention to the weekly US business reserves report released by the US Energy Information Agency (EIA) on Thursday, which gave mixed numbers, according to Mizuho’s Robert Yawger.

That report reported an increase in commercial inventories that is largely due to a decrease in the utilization rate of refineries, at 79.6%, a minimum in 22 months, well below the 92.0% of In the past week.

According to Yawger, this difference is due to the effect of winter storm Elliot at the end of December in the United States, which caused disturbances in several refineries, particularly in southern Texas.

This Thursday’s report also showed a brutal fall in the demand for refined products in the United States, of 20% over the immediately preceding week.

This drop is particularly evident in the case of gasoline (-19%) and distilled products, which include fuel for domestic heating (-28%), among others.

For Lebow, despite the rebound, “the direction of the market remains downward, in a context of a resurgence of the covid-19 in China and the prospect of a Federal Reserve that continues betting on rate hikes.”