Crude Drops as Rising US Inventories Add to COVID-19 Pressures

By Adedapo Adesanya

Oil prices extended their fall into another day on Wednesday as surging COVID-19 cases affecting demand were further dampened by a slight increase in crude inventories in the United States.

Consequently, the Brent crude futures dropped 27 cents or 0.41 per cent to $65.05 per barrel, while the West Texas Intermediate (WTI) crude futures lost 27 cents or 0.44 per cent to trade at $61.08 per barrel.

According to the Energy Information Administration (EIA), there was an inventory build of 600,000 barrels for the week to April 16 in the US compared with the decline of 5.9 million barrels for the previous week. Analysts had expected a draw of 2.86 million barrels.

A day earlier, the American Petroleum Institute (API) reported a modest inventory build of less than half a million barrels.

The oil environment had in recent day’s been swayed southwards by the fast increase in new COVID-19 infections in India, the third biggest driver of global oil demand after the US and China.

On Tuesday, the country reported its worst daily death toll from COVID-19 and is facing an oxygen supply crisis to treat patients. Large parts of the country are now under lockdown due to a huge second wave of the coronavirus pandemic.

In addition to worries about India, the European Medicines Agency said its safety committee concluded that a warning about unusual blood clots with low blood platelets should be added to the product information for Johnson & Johnson’s coronavirus vaccine, but said the benefits outweighed the risk.

Analysts, however, noted that despite the pandemic hotspots in places like India and growing concerns in Japan, the world’s fourth-biggest oil user, signs are still positive for a fuel demand recovery in the US, Europe and the United Kingdom.

There is also more worry for the black gold as the US House Judiciary Committee cleared a bill that would leave the Organization of the Petroleum Exporting Countries (OPEC) open to antitrust lawsuits over production cuts.

The committee’s move on the No Oil Producing and Exporting Cartels Act of 2021, known as NOPEC, called attention to long-running efforts by the US to make it illegal for OPEC to manipulate oil prices.

The NOPEC bill would make it illegal for any foreign state to act collectively to limit oil production or set prices. The bill still has a long way to go before it potentially becomes a law.