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Increase in Demand Led to Surge in Oil Price

Oil prices Increase by 2% on Wednesday, after U.S. distillate inventories posted a large drawdown and refining activity picked up. This boosted the hopes for rising fuel Demand.

Due to the surge in coronavirus cases in India the market remains concerned. Brent crude futures rose 1.28%, or 85 cents, to settle at $67.27 per barrel. U.S. West Texas Intermediate crude futures settled 1.46%, or 92 cents, higher at $63.86 per barrel.

The Energy Information Administration said that Crude inventories of the US increased by 90,000 barrels last week to 493.1 million barrels on Wednesday. Analysts had expected a 659,000-barrel rise. Distillate stockpiles fell by 3.3 million barrels in the week, and refining capacity rose to 85.4% on the week.Phil Flynn, senior analyst at Price Futures Group in Chicago said that the market is taking this optimistically. Gasoline demand week-over-week was down a smidge, which was disappointing but it was offset by the fact that they had a big leap in distillate demand.

Goldman Sachs, a U.S. bank said that it is expecting the biggest jump in Oil demand ever at 5.2 million barrels per day over the next six months, as vaccination campaigns accelerate in Europe and travel demand climbs. The loosening of international travel restrictions in May would hike jet fuel demand by 1.5 million barrels per day.The Organization of the Petroleum Exporting Countries (OPEC+) has decided to stick to plans for a phased easing of Oil production restrictions from May to July. This is an indication that the group is confident that global demand will recover.

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