Oil holds above $50 on US stocks draw, Brexit deal hopes

Oil prices edged down on Thursday but were holding well above $50 per barrel in light holiday trade as a drop in US stockpiles spurred demand hopes, while hints of an imminent Brexit deal underpinned investors’ risk appetite.

Brent crude futures were down $0.4, or 0.8%, to $50.80 a barrel at 1100 GMT, while US West Texas Intermediate (WTI) crude was down $0.36, or 0.75%, to $47.76. Both contracts gained more than 2% on Wednesday.

“Lower US inventories of crude and fuels as well as signs of a potential Brexit deal which led to weaker US 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 oil markets were quiet with investors in holiday mode.

US crude inventories fell by 562,000 barrels in the week to December 18 to 499.5 million barrels, the Energy Information Administration (EIA) 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, swerving away from a chaotic finale to the Brexit split.

“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 drugmakers 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.

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