Official numbers revealed a surprising increase in oil stocks in the United States, as COVID-19 cases rise in Europe, Russia. Hence, oil prices fell to their lowest level in two weeks. Moreover, some outbreaks of infection in China harmed prospects for an economic recovery.
Brent crude dropped 94 cents, or 1.1%, to $83.64 per barrel by 0655 GMT. It hit a two-week low of $82.32 earlier and declined by 2.1% in the prior session.
U.S. oil was below 89 cents, a 1.1% decline, at $81.77 per barrel. It hit a one-week low after falling 2.4% on Wednesday.
Outbreaks of COVID-19 infections in China, record deaths, and the threat of lockdowns in Russia, forward with rising cases in western Europe, were putting the obstacles on a multi-week rally in oil prices.
ANZ Research commodities strategists Daniel Hynes and Soni Kumari said in a new report on Thursday that a surge in new coronavirus cases threatens to interrupt the improvement in oil demand.
Coronavirus Causing Shortages
In the U.S., the economy likely expanded at the slowest rate in more than twelve months in the June-September quarter amid a resurgence of coronavirus infections amid strained global supply chains and global deficiencies of goods like autos.
Crude stocks increased by 4.3 million barrels last week. The U.S. Energy Department started more than double the 1.9 million-barrel gain estimate by analysts.
Citi Research commodities analysts said in a note that the “hefty” stock build approached on the back of a significant increase in net imports of crude oil and still slow refinery processing.
However, gasoline stocks dropped by 2 million barrels to the weakest in nearly four years, even as U.S. consumers fight rising prices to fill their tanks.
At the WTI delivery hub in Cushing, Oklahoma, crude storage is the most consumed in three years. Hence, prices for longer-dated futures contracts intimating supplies will stay low for months.