Oil extends losses on US stock build, pandemic concerns

India reported world’s highest daily increase in new coronavirus cases, which raised oil demand concerns

LONDON:

Oil prices extended their losses into a third day on Thursday as a surprise build-up in US crude inventories and a resurgence of Covid-19 cases in India and Japan raised demand recovery concerns.

Brent crude futures fell $0.44, or 0.67%, to $64.88 a barrel by 1041 GMT, having dropped by $1.25 on Wednesday. West Texas Intermediate (WTI) US crude futures were down $0.38, or 0.62%, at $60.97 after losing $1.32 the previous day.

US crude oil stockpiles unexpectedly edged higher by 594,000 barrels in the week to April 16, the Energy Information Administration said on Wednesday. Analysts had expected a drop of 3 million barrels, a Reuters’ survey showed.

“An unexpected and high increase in US inventories fuelled concerns over weak demand,” said Rakuten Securities analyst Satoru Yoshida.

“What is hurting the market sentiment is also the fact that the Covid-19 pandemic is spreading again at a fast pace in India and Japan despite hopes that vaccinations would improve the infection situation.”

India, the world’s third-largest oil user, on Thursday reported the world’s highest daily increase to date with 314,835 new coronavirus cases.

Japan, the world’s fourth-largest oil importer, is expected to announce a third wave of lockdowns affecting Tokyo and three western prefectures, media reported.

Organisation of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, are due to meet next week, but major changes to policy are unlikely, Russia’s deputy prime minister and OPEC+ sources said.

Adding to the bearish sentiment is progress on talks between Iran and world powers to resurrect the 2015 nuclear accord, said PVM oil analyst Tamas Varga.

Iranian oil exports could jump and add to crude oversupply should a deal be reached.

“It is the same old story, brighter oil balance for the second half of the year competes with the current gloomy reality,” Varga said. “At the moment, the latter is winning, but it is only a question of time before this trend reverses.”