Oil prices fell on Thursday after an unexpected rise in U.S. crude oil inventories and as rising COVID-19 infections threaten demand, but prices held on to most of their gains from the previous session on expectations that supplies will remain tight through year-end.
Brent crude fell 32 cents, or 0.4%, to $71.91 a barrel at 0347 GMT, after rising 4.2% in the previous session.
U.S. West Texas Intermediate (WTI) crude fell 27 cents, or 0.4%, to $70.03 a barrel, after rising 4.6% on Wednesday.
“Volatility in energy remains elevated as traders grapple with short-term demand weakness from Delta variant concerns and expectations the crude deficits will last till the end of the year. Oil will struggle to recoup all of its losses until the trend of new curbs or restrictions starts to ease across Southeast Asia, Australia, and Europe,” Edward Moya, senior analyst at OANDA.
Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.
Analysts had expected a 4.5 million-barrel drop. However, gasoline and distillate inventories posted draws of 121,000 barrels and 1.3 million barrels, respectively, indicating higher demand due to the summer driving season.
With OPEC+, comprising the Organization of the Petroleum Exporting Countries and allies like Russia, unlikely to get the market soon and Iranian negotiations delayed, the most relevant risk to market fundamentals remains a deterioration of demand due to new virus restrictions. Only a really tremendous demand shortfall would tip the market balance into a surplus,” analysts from Citi said.
JPMorgan analysts expect global demand to average 99.6 million barrels per day (mbd) in August, up by 5.4 mbd from April.
Oil prices fell earlier this week following a deal by OPEC+ to boost supply by 400,000 barrels per day from August through December.
