Oil prices fell on Wednesday as rising fuel stockpiles in the United States raised concerns of declining demand in the world’s biggest oil consumer amid a massive spike in COVID-19 cases caused by the Omicron variant.
The American Petroleum Institute (API) reported on Tuesday night that as of the week of December 31, US gasoline inventories increased by 7.1 million barrels. Distillate stocks increased by 4.4 million barrels this week.
The surge in inventories that exceeded analysts’ expectations weakened investors’ bullish outlook on the previous trading day, when prices rose by more than 1%, as market participants considered major producers’ decision to increase supply next month as a response to COVID-19. Meet demand for a long time.
Brent crude futures fell 28 cents, or 0.4%, to $79.72 a barrel at 0329 GMT after hitting a high of $80.26, while U.S. West Texas Intermediate (WTI) crude futures fell 29 cents, or 0.4%, to $76.70 a barrel.
“We think market fundamentals have weakened recently as reflected in the aggregate timespread which is a good indicator of the prevailing demand-supply balance,” Barclays analyst Amarpreet Singh said in a note.
There is a spot premium in the crude oil market, that is, the price of crude oil supply in the later period is higher than that of spot futures, and the price of Brent crude oil futures has fallen from the two-year high in November.
The spread between the recent month’s Brent crude oil futures and the six-month delivery of Brent crude fell from $6.30 per barrel on November 3 to $3 per barrel on Wednesday, reflecting the sharp increase in Omicron cases. Concerns about crude oil demand.
Barclay’s Singh believes that Omicron will have less of an impact on oil demand as it proves more mild than initially feared.
But, “there will be some effect on demand from increased restrictions on international travel and the sheer scale of the recent spread,” he wrote.
As expected, The Organization of the Petroleum Exporting Countries, Russia, and allies, together called OPEC+, on Tuesday agreed to add another 400,000 barrels per day of supply in February, as it has every month since August.
The decision to stick their output increase reflected the group’s view that Omicron will only have a short-lived impact on global energy demand.
“The plan to gradually return production can move forward as OPEC+ anticipates a tighter market in the first quarter,” OANDA analyst Edward Moya said.