Oil costs dropped in early trade on Thursday, adding to heavy losses overnight, after a build in United States gas stocks pointed to a deteriorating outlook for fuel demand as coronavirus cases soar in The United States and Canada and Europe.
United States West Texas Intermediate (WTI) unrefined futures fell 27 cents, or 0.7 percent, to US$3976 a barrel at 0127 GMT, after skidding 4 percent on Wednesday.
Brent crude futures retreated 21 cents, or 0.5 percent, to $4152 a barrel after sliding 3.3 percent on Wednesday.
US fuel stocks rose by 1.9 million barrels in the week to Oct. 16, the Energy Information Administration (EIA) said, compared with expectations for a 1.8 million-barrel drop.
Total item supplied, a proxy for demand, averaged 18.3 million barrels daily in the four weeks to Oct. 16, the EIA said – down 13 percent from the very same duration a year previously.
” The most recent EIA report revealed an unforeseen boost in gasoline stocks, which came at the same time as decreased fuel output due to the fact that of refinery failures due to Cyclone Delta. So the ramification is fuel demand is quite soft,” stated Lachlan Shaw, head of product research at National Australia Bank.
With brand-new daily COVID-19 infections hitting records in numerous US states and in Europe, brand-new lockdowns and China’s clampdown on outbound travel to help stem the spread of the illness bode ill for fuel demand.
Aggravating the outlook, hopes that US legislators would reach an agreement with the White House on a financial stimulus bundle dimmed late on Wednesday after President Donald Trump accused Democrats of holding up a compromise deal.
” The revival in coronavirus cases is seeing the United States motorist progressively putting the brakes on. This makes the negotiations on a United States stimulus bundle even more crucial,” ANZ Research study stated in a note.
NAB’s Shaw stated even if a COVID-19 relief package was authorized, it would likely offer oil costs just a short-term lift.
” It may enhance the demand tone for a week or more, but with the coronavirus spread speeding up there are headwinds there,” he stated.
