An oil tanker waits in line in the ocean outside the Port of Long Beach-Port of Los Angeles complex, in Los Angeles, California, the US. Picture: REUTERS/LUCY NICHOLSON
An oil tanker waits in line in the ocean outside the Port of Long Beach-Port of Los Angeles complex, in Los Angeles, California, the US. Picture: REUTERS/LUCY NICHOLSON

Singapore — Oil prices fell on Wednesday after an industry report showed an unexpected build-up in US oil inventories last week, which heightened the worry about a resurgence in Covid-19 infections potentially dampening fuel demand.

Brent crude futures fell 52c, or 0.8%, to $68.83 a barrel at 3.54am GMT, giving up Tuesday’s 1.1% gain.

US West Texas Intermediate (WTI) crude futures dropped 50c, or 0.7%, to $66.70 a barrel, after rising $1 on Tuesday.

The market “has come under a bit of downward pressure in early morning trading today after a bearish and rather surprising inventory report from the API”, ING Economics analysts said in a note, referring to weekly figures from the American Petroleum Institute.

US crude stocks rose by 806,000 barrels for the week that ended July 16, according to two market sources, citing American Petroleum Institute figures.

By comparison, 10 analysts polled by Reuters had estimated, on average, that crude stocks fell by about 4.5-million barrels.

Investors are awaiting data from the US Energy Information Administration to see whether it confirms there was an increase in crude inventories, which would end an eight-week streak of inventory drawdowns.

“The price moves today and potentially tomorrow will be driven by US oil stocks data, but the biggest thematic will be the Opec+ deal to add 400,000 barrels a day (bbl/day) a month vs whether demand will hold up given what we're seeing on the Delta variant,” Commonwealth Bank analyst Vivek Dhar said.

A deal by oil cartel Opec and allies, together known as Opec+, to boost supply by 400,000bbl/day each month from August through December sparked an oil price sell-off on Monday, worsened by demand fears with cases of the Delta variant of the coronavirus picking up in major markets like the US, Britain and Japan.

While fuel demand has improved during the peak summer months, a surge in Delta variant Covid-19 cases is taking a toll on the demand outlook.

“The Delta dread has a rather firm grip of the oil market sentiment, having put a big question-mark over the demand rebound narrative of the past several weeks,” said Vandana Hari, energy analyst at Vanda Insights.

“Crude may eke out some modest gains in the coming days, but it is hard to see prices jumping to the higher orbits any time soon,” said Hari.

Reuters

subscribe

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.