Oil down again on US inventory build and rampant Covid in India

London — Oil prices extended their losses into a third day on Thursday as a surprise build-up in US crude inventories and a resurgence of Covid-19 cases in India and Japan raised fears that a demand recovery could be stalled.

Brent crude futures fell 37c, or 0.57%, to $64.95 a barrel by 9.04am GMT, having dropped by $1.25 on Wednesday. US West Texas Intermediate (WTI) crude futures were down 35c, or 0.57%, at $61 after losing $1.32 the previous day.

Both contracts had closed at their lowest since April 13 and are down about 3% this week.

US crude oil stockpiles unexpectedly edged higher in the week to April 16, the Energy Information Administration (EIA) said on Wednesday, with the inventories rising by 594,000 barrels. Analysts had expected a drop of 3-million barrels, a Reuters survey showed.

“An unexpected and high increase in the US inventories fueled concerns over weak demand,” said Rakuten Securities analyst Satoru Yoshida.

“What is hurting market sentiment is also that Covid-19 is spreading again at a fast pace in India and Japan despite hopes that vaccinations would improve the infection situation.”

On Thursday, India, the world’s third-largest oil user, reported 314,835 new coronavirus cases over the previous 24 hours, the highest daily increase recorded anywhere. Japan, the world’s number four oil importer, is expected to issue a third state of emergency in Tokyo and three western prefectures that could last for about two weeks, according to media reports.

Oil cartel Opec and allies, led by Russia (Opec+), are due to hold a largely technical meeting next week, in which major changes to policy are unlikely, Russian deputy prime minister and Opec+ sources said.

Adding to the bearish sentiment is progress on talks between Iran and world powers to resurrect the 2015 nuclear accord, said PVM oil analyst Tamas Varga. Iranian oil exports could jump and add to crude oversupply should a deal be reached.

“It is the same old story; brighter oil balance for the second half of the year competes with the current gloomy reality,” Varga said. “At the moment, the latter is winning, but it is only a question of time before this trend reverses.” 

Reuters