By Adedapo Adesanya
Oil prices weakened further by more than 2 per cent on Wednesday, compounding more worries for the global market due to a sour outlook for fuel demand as COVID-19 cases surge worldwide, outweighing a fall in crude inventories.
Yesterday, the Brent crude oil futures went down by $1.59 or 2.3 per cent to $67.44 per barrel, while the West Texas Intermediate (WTI) crude oil futures lost $2.04 or 3.06 per cent to trade at $64.53 per barrel.
Both benchmarks have been under pressure for the last few weeks due to the rise in infections caused by the Delta variant of the coronavirus worldwide.
Several countries have re-introduced travel restrictions and air traffic has softened in recent weeks, plunging some gains recorded in the past months.
The apprehension that stemmed from the likely impact of the recent development on world economies and oil demand was so heavy that even a drop in crude inventories in the world’s largest producing country, the US, couldn’t sway the market.
The Energy Information Administration (EIA) reported an inventory draw of 3.2 million barrels for the week to August 13 compared with a small draw of 400,000 barrels for the previous week and a slightly bigger draw of 1.1 million barrels reported for the week to August 13 by the American Petroleum Institute (API).
Analysts had expected an inventory draw of 1.26 million barrels for the period.
In addition, fuel demand in the world’s top consumer has steadily increased throughout the year with the four-week average of overall US product supplied was 20.8 million barrels per day, in line with pre-coronavirus levels from 2019.
Although weekly production figures are volatile, analysts noted that US crude output continued its steady rise, hitting 11.4 million barrels per day last week.
This confirmed expectations from the International Energy Agency (IEA) which last week said that demand for crude oil was expected to increase at a slower rate over the rest of 2021 because of surging cases of the Delta variant.
The market was also impacted by the rise in the US Dollar index by 0.1 per cent, hitting its highest level since April.
Crude prices are often affected by the Dollar because the commodity is priced in the greenback; when the American currency rallies, it makes oil more expensive for foreign buyers.
On Wednesday, a US offshore regulator said efforts to resume a federal oil and gas leasing program were underway and would soon bear results following a court decision ending a suspension, the market will keep an eye on this development.
