Oil prices fall after unexpected rise in US crude oil inventories
An offshore oil rig off Huntington Beach, California on April 5, 2020.
Leonard Ortiz | MediaNews Group | Orange County Registry | Getty Images
Oil prices fell on Thursday after an unexpected increase in crude oil inventories in the United States and as rising COVID-19 infections threaten demand, but prices retained most of their gains from the previous session in due to expectations that supplies will remain tight until the end of the year.
Brent crude fell 32 cents, or 0.4%, to $71.91 a barrel at 0347 GMT, after rising 4.2% in the previous session. U.S. West Texas Intermediate (WTI) crude fell 27 cents, or 0.4%, to $70.03 a barrel, after rising 4.6% on Wednesday.
“Energy volatility remains high as traders grapple with weak near-term demand due to Delta Variant concerns and expectations that crude shortfalls will last through the end of the year. “said Edward Moya, principal analyst at OANDA.
“Oil will struggle to recoup all of its losses until the trend of further curbs or restrictions begins to ease in Southeast Asia, Australia and Europe,” he said.
Crude inventories in the United States, the world’s largest consumer of oil, unexpectedly rose by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, according to the US Energy Information Administration data.
Analysts had expected a drop of 4.5 million barrels.
Still, gasoline and distillate inventories posted draws of 121,000 barrels and 1.3 million barrels, respectively, indicating higher demand due to the summer driving season.
With OPEC+, comprising the Organization of the Petroleum Exporting Countries and allies like Russia, unlikely to get the deal soon and Iranian talks delayed, the most relevant risk to market fundamentals remains a deterioration in demand due to new virus restrictions, Citi analysts said.
“Only a truly huge demand deficit would tip the market equilibrium into surplus,” they added.
JPMorgan analysts expect global demand to average 99.6 million barrels per day (mbd) in August, up 5.4 mbd from April.
Oil prices fell earlier this week following an OPEC+ agreement to increase supply by 400,000 barrels per day from August to December.