Oil prices fell on Wednesday after an unexpected increase in US oil inventories last week. In parallel, fuel demand reduced, amid growing potential concerns about a resurgence of COVID-19 infections.
Brent crude futures fell 36 cents, or 0.5%, to $68.98 a barrel at 0627 GMT, giving up some of Tuesday’s 1.1% gain.
West Texas Intermediate (WTI) crude futures fell 36 cents, or 0.5%, to $66.84 a barrel after rising $1 on Tuesday.
The market came under downward pressure after the bearish and rather surprising inventory report from API (American Petroleum Institute). Based on the relevant figures, US crude inventories increased by 806,000 barrels in the week of July 16. However, some analysts had estimated that, on average, crude oil inventories fell by about 4.5 million barrels.
Investors await weekly official data from the U.S. Energy Information Administration to see if it confirms an increase in crude oil inventories that will end an eight-week streak of reducing stockpiles.
An agreement by the Organization of the Petroleum Exporting Countries, known as OPEC+, and its allies to increase supply by 400,000 barrels per day each month from August to December, drove oil prices down Monday, exacerbated by fears of demand for the Delta variant.
Fuel demand improves during the peak summer months, while the increase in Delta varianted COVID-19 cases adversely affects the demand outlook. Meanwhile, the coronavirus is picking up in major markets like the US, UK and Japan.
In these conditions, the price is likely to be bearish tomorrow as well as today. Doubts over whether demand will continue and OPEC+’s agreement to add 400,000 barrels per month become important given the potential effects of the COVID-19 Delta variant.
Crude oil may see some modest gains in the short term, but prices are unlikely to see higher levels anytime soon.
Relating to demand, while global demand is expected to average 99.6 million barrels per day (mbd) in August, up 5.4mbd from April, cold weather will begin in the northern hemisphere and the peak travel season is being behind us. As a matter of fact, it will be a constructive commercial expectation to hope that the Delta variant will not disturb the balance that these two elements will bring to the market.
