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Oil Prices Fall on Unexpected Gasoline Surge

Oil prices fell on Thursday after official figures showed a big increase in U.S. gasoline stocks, causing concerns about demand for crude weakening in the world’s biggest consumer of the resource at a time when supplies around the world are rising.

Brent crude eased 36 cents, or 0.6%, to $62.80 a barrel by 0136 GMT.

U.S.WTI  fell 38 cents, or 0.6%, to $59.39 a barrel.

 

oil prices 08-04-2021
US WTI crude Oil Futures one Year Performance chart

 

While crude stocks in the United States fell more than forecast by analysts, gasoline inventories jumped sharply against expectations, the Department of Energy said on Wednesday.

Oil inventories dropped by 3.5 million barrels last week to nearly 502 million barrels. In comparison, gasoline stocks increased by 4 million barrels, against expectations of a decline, to just over 230 million barrels, as refiners ramped up production before the summer driving season.

“Refiners may want to pull back on the run rate a bit to keep gasoline storage from challenging the all-time record.”Bob Yawger, Director of Energy Futures, Mizuho Securities.

However, markets express concerns about the prospects of rising crude production even as demand continues to remain weak. In the initial few days of the current month, Russia’s oil output has been on the rise compared to production levels seen last month.

OPEC+ on Increasing Crude Oil Supply

Meanwhile, OPEC+ has also signaled interest in increasing crude supply by 2 million BPD by July. Even though economists anticipate an improvement in the overall outlook for the global economy this year, which could raise oil demand, there remain considerable uncertainties due to the recent spike in cases being seen across Europe and emerging markets like Brazil and India.

Iran may see some sanctions lifted and add to global supplies, with the U.S. and other powers holding talks on reviving a nuclear deal that almost stopped Iranian oil from coming to market.

However, the International Monetary Fund (IMF) said earlier this week that the massive public spending deployed to combat the global COVID-19 pandemic might increase global growth to 6% this year, a rate not achieved since the 1970s.

Higher economic growth would boost demand for oil and its products, helping to reduce stockpiles.

Read also: Oil Prices Gain 0.4% on IMF’s Stronger Economic Outlook.