Rising crude stocks subdue oil prices

Singapore — Oil prices fell on Thursday after an unexpected rise in US crude oil inventories and as increasing Covid-19 infections threaten demand, but prices held on to most of their gains from the previous session on expectations that supplies will remain tight through year-end.

Brent crude fell 32 US cents, or 0.4%, to $71.91 a barrel at 3.47am GMT, after rising 4.2% in the previous session. US West Texas Intermediate (WTI) crude fell 27c, or 0.4%, to $70.03 a barrel, after rising 4.6% on Wednesday.

“Volatility in energy remains elevated as traders grapple with short-term demand weakness from Delta variant concerns and expectations the crude deficits will last till the end of the year,” said Edward Moya, senior analyst at Oanda.

“Oil will struggle to recoup all of its losses until the trend of new curbs or restrictions starts to ease across Southeast Asia, Australia and Europe,” he said.

Crude inventories in the US, the world’s top oil consumer, rose unexpectedly by 2.1-million barrels last week to 439.7-million barrels, up for the first time since May, US Energy Information Administration data showed.

Analysts had expected a 4.5-million-barrel drop.

Still, petrol and distillate inventories posted draws of 121,000 barrels and 1.3-million barrels, respectively, indicating higher demand due to the summer driving season.

The most relevant risk to market fundamentals remains a deterioration of demand due to new virus restrictions, analysts from Citi said.

“Only a really tremendous demand shortfall would tip the market balance into a surplus,” they added.

JPMorgan analysts expect global demand to average 99.6-million barrels per day (bpd) in August, up by 5.4-million bpd from April.

Oil prices fell earlier this week after a deal by Opec+ to boost supply by 400,000 bpd from August through December. 

Reuters