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Oil Rally Unaffected By Major Product Builds

The American Petroleum Institute (API) reported on Tuesday a draw in crude oil inventories of 1.663 million barrels for the week ending January 1.

Analysts had predicted an inventory draw of 1.271 million barrels for the week.

In the previous week, the API reported a draw in oil inventories of 4.785-million barrels, after analysts had predicted a draw of 2.100 million barrels.

Both Brent and WTI were up on Tuesday afternoon before the data release after the Ministerial Meeting for OPEC+ dished out a production decrease of nearly a million barrels for February and March, courtesy mostly of Saudi Arabia's surprise and voluntary 1 million barrel per day cut, more than offsetting production increases that were granted to Russia and for February and March.  

New lockdowns—and lockdown extensions—continue to cap any gains, with the UK announced a new strict national lockdown this week that will last for six weeks. Scotland will also enter into a strict lockdown at midnight tonight. Italy announced on Tuesday that it would extend its lockdowns through January 15, while Germany announced it would extend its lockdowns until the end of the month. The lockdowns continue to take a toll on oil demand.

An hour before Tuesday's data release, WTI had risen by $2.32 (+4.87%) to $49.94, up $2 per barrel on the week. The Brent crude benchmark had risen on the day $2.53 at that time (+4.95%) to $53.62—up roughly $2.30 per barrel on the week.

U.S. oil production held steady at 11.0 million bpd for the week ending December 25, according to the Energy Information Administration—2.1 million bpd lower than the all-time high of 13.1 million bpd reached in March.

The API reported a large build in gasoline inventories of 5.473 million barrels for the week ending January 1—compared to the previous week's 718,000-barrel draw. Analysts had expected a 1.662-million-barrel build for the week.

Distillate inventories also saw a massive increase of 7.136 million barrels for the week, compared to last week's 1.877-million-barrel decrease, while Cushing inventories rose this week by 1.003 million barrels.

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At 4:32 p.m. EDT, the WTI benchmark was trading at $49.95, while Brent crude was trading at $53.63.

By Julianne Geiger for Oilprice.com

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