Oil prices fell on Wednesday after rising US fuel stockpiles. This showed that demand in the world’s largest oil consumer fell, with the massive increase in COVID-19 cases caused by the Omicron variant.
Brent crude futures fell 9 cents, or 0.11%, to $79.91 at 0537 GMT, while West Texas Intermediate (WTI) crude futures fell 13 cents, or 0.17%, to $76.86 a barrel.
Two consecutive days of strong gains have put crude into overbought territory and market sentiment looks set to continue.
The Organization of the Petroleum Exporting Countries, Russia and its allies agreed on Tuesday to add an additional 400,000 bpd in February, as they have done every month since August.
The decision to continue production growth reflects the group’s view that Omicron will only have a short-term impact on global energy demand.
U.S. gasoline inventories increased by 7.1 million barrels for the week of December 31, the American Petroleum Institute (API) reported late Tuesday. Distillates inventories increased by 4.4 million barrels in the same week.
The surging stockpiles that beat analysts’ expectations undermined investors’ bullish outlook in the previous session, where prices rose more than 1% as market participants decided to add supplies next month.
Rising US production is weighing on oil prices as more and more producers find it profitable to return to the wells, amid the appeal of high prices.
On the one hand, there is a growing hope that the Omicron variant, at least in highly vaccinated parts of the world, could be a harbinger of a transition to endemic, as more manageable than a pandemic.
But on the other hand, a serious awareness is available that countries remain on high alert and governments are not ready to relax restrictions as infections skyrocket continues to weigh on prices.