By Adedapo Adesanya
Oil prices dropped again on Wednesday despite a massive drop in crude inventories in the United States outweighed by concerns about the coronavirus pandemic effect on demand.
At the market yesterday, the Brent crude lost 4 cents or 0.07 per cent to sell at $55.84 per barrel while the United States’ West Texas Intermediate (WTI) chipped off 24 cents or 0.45 per cent to trade at $52.53 per barrel.
The Energy Information Administration (EIA) said on Wednesday that the US crude oil stockpiles dropped by nearly 10 million barrels last week, the lowest since March at 476.7 million barrels due to a sharp drop in imports.
The agency reported a crude oil inventory draw of 9.9 million barrels for the week to January 22. The is more compared with a build of 4.4 million barrels for the previous week. It also beat analyst expectations for a modest increase of some 600,000 barrels.
Comparatively, the American Petroleum Institute (API) reported its own estimate for oil inventories, which was for a draw of 5.3 million barrels.
Although this amount exceeded analyst expectations by a wide margin, it could not help prices as concerns about the market direction still lingered.
The number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, while Asia scrambles to contain fresh outbreaks, weighing on oil demand and prices.
China, which has been reporting rising COVID-19 cases, for the first time yesterday saw a drop as only 75 cases were recorded but still, this did not change the trajectory of prices.
The market also overlooked support by reports about possible supply disruptions from Iraq and Libya. The former said it planned to reduce production in line with its commitments under the OPEC+ agreement, while the latter’s exports are being threatened by the Petroleum Facilities Guard, which claims it is owed salaries.
Meanwhile, the International Monetary Fund (IMF) said it expected oil prices to average $50 a barrel this year, which would be significantly higher than the average for 2020 but lower than the average for 2019.
However, the forecast was an upward revision on IMF’s previous prediction for oil prices, this could refresh investors appetite as it is a signal that the market is improving slowly.
Dipo Olowookere