Oil futures threatened to extend a losing streak to three days, remaining under pressure Wednesday after official data showed an unexpected rise in U.S. crude inventories.
West Texas Intermediate crude for September delivery
the global benchmark, fell $1.23, or 1.7%, to $71.18 a barrel on ICE Futures Europe.
The Energy Information Administration said U.S. crude inventories rose by 3.6 million barrels in the week ended July 30. Gasoline inventories, however, fell by 5.3 million barrels, the agency said, while distillate stocks were up 800,000 barrels.
“With refinery runs anchored below 16 million barrels per day for a second consecutive week and exports dropping, we’ve seen crude inventories show a surprise build,” said Matt Smith, director of commodity research at Clipper Data.
“Ongoing strength in imports has also helped encourage a second build in three weeks,” he said, though the large drop in gasoline inventories helped offset the bearishness of the crude data. Implied gasoline demand “has popped as we hit the peak of summer driving season,” Smith said. “Implied distillate demand dropped materially, however, leading to a minor build.”
Analysts surveyed by S&P Global Platts, on average, had forecast the EIA data to show crude inventories down by 4 million barrels last week. Gasoline stocks were expected to show a drop of 1.1 million barrels, while distillate supplies were seen down 600,000 barrels.
The American Petroleum Institute late Tuesday reported that U.S. crude inventories fell by 879,000 barrels last week, according to sources. Gasoline supplies were said to fall by 5.8 million barrels, while distillate inventories were down 717,000 barrels.
Crude prices are facing pressure this week as the spread of the delta variant of the coronavirus that causes COVID-19 stokes concerns about the outlook for demand, particularly in China, the world’s second largest economy.
“The risks to demand in China remain the number one topic,” said Barbara Lambrecht, analyst at Commerzbank, in a note, observing some analysts have already started reviewing gross domestic product forecasts for the third quarter.
China on Tuesday ordered mass coronavirus testing in Wuhan, as a series of COVID-19 outbreaks reached the city where the disease was first detected in late 2019. Beijing’s top transportation official cut off travel into the capital to protect it from exposure to the virus, The Wall Street Journal reported.
China’s National Health Commission said 1.69 billion shots of COVID-19 vaccines had been administered to China’s population of 1.41 billion people by the end of Monday, the Journal reported. Much of the transmission of the virus is silent, the report said, with patients often having no or only very mild symptoms and therefore not seeking medical attention.
But renewed business and consumer lockdowns are what worry oil traders.
“There is particular nervousness on the oil market because oil demand suffers considerably from mobility restrictions imposed in a bid to combat coronavirus,” Lambrecht wrote. “Let us not forget that global oil demand slumped by 8.7% year-on-year last year, whereas coal demand declined by 4% and gas demand fell by ‘only’ just shy of 2%.”
fell 1.5% to $2.0944 a gallon.
September natural gas
jumped 4.3% to $4.202 per million British thermal units.