Oil Falls on COVID-19 Worries, US Crude Inventory Build

By Adedapo Adesanya

Oil sank by more than $2 a barrel on Wednesday after industry data showed that crude stockpiles in the United States rose more than expected.

The price of Brent crude dipped by $2.16 or 2.3 per cent to $93.20 per barrel, while the US West Texas Intermediate (WTI) crude fell by $2.44 or 2.7 per cent to $88.47 a barrel.

The Energy Information Administration (EIA) reported a crude oil inventory build of 3.9 million barrels for the week, which ended on November 4, compared with a draw of 3.1 million barrels for the previous week, which followed a weekly build of 2.6 million barrels, as estimated by the EIA.

Analysts had expected a stockpile rise of 1.4 million barrels.

Earlier, the American Petroleum Institute (API) reported an inventory build of 5.6 million barrels in crude oil for the week under review, estimating that inventories had grown by a cumulative 31 million barrels since the start of the year.

Also, US gasoline stocks shed 900,000 barrels in the week to 205.7 million barrels, the EIA said.

The US midterm elections also had a negative effect on prices on Tuesday, with both Brent crude and West Texas Intermediate shedding $2 per barrel.

Beyond the oil inventory report and the midterms, the market focused on China and its inability to control COVID with concerns that a rebound in COVID-19 cases in top importer China would hurt fuel demand.

After hopes that China would relax its curbs were dashed, the market has been hit with bearish news. COVID-19 cases in Guangzhou and other Chinese cities also surged, with millions of residents of the global manufacturing hub requiring COVID-19 tests on Wednesday.

Pressure also came as a stronger US Dollar, which makes oil more expensive for buyers in other currencies, also weighed on crude prices. The greenback advanced against several major currencies as results showed that the Republican party wasn’t sweeping as expected in the US elections.

Meanwhile, supply concerns remain as the European Union will ban Russian crude imports by December 5 and Russian oil products by February 5, 2023, in retaliation for Russia’s invasion of Ukraine.