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Oil Down, Ever-Rising Number of COVID-19 Cases Stoke Fuel Demand Worries

·2 min read

By Gina Lee

Investing.com – Oil was down Thursday morning in Asia, with investors weighing the ever-rising number of COVID-19 cases and the impact for fuel demand against a fifth consecutive week of declines in U.S. crude oil supply.

Brent oil futures edged down 0.16% to $55.97 by 10:30 PM ET (3:30 AM GMT) and WTI futures edge down 0.15% to $52.83. Both Brent and WTI futures remained above the $50 mark.

“Oil market’s sizzling rally likely took a hiatus as the stronger dollar and the omnipresent gasoline supply overhang offset the evaporating U.S. crude inventories,” Axi chief global market strategist Stephen Innes told Reuters.

U.S. crude oil supply data from the U.S. Energy Information Administration (EIA) released on Wednesday showed a draw of 3.247 million barrels for the week to Jan. 8. The draw was bigger than the 2.266-million-barrel draw in forecasts prepared by Investing.com, but smaller than the previous week’s 8.010-million-barrel draw.

Tuesday’s data from the American Petroleum Institute showed a draw of 5.821 million barrels.

The EIA data also showed a rise in gasoline and distillate inventories as refiners increased output to the highest level since August 2020.

On the COVID-19 front, China reported that the number of new cases in its northeastern province of Heilongjiang nearly tripled, the biggest daily jump in more than ten months. The outbreak in the world’s second largest oil consumer underscores the growing threat ahead of the Lunar New Year holidays in February.

In Europe, tighter and longer lockdown measures were introduced in some countries to curb the B177 strain of the virus first seen in southeastern England in September 2020 as the impact of COVID-19 vaccine rollouts is not expected to be seen for another two to three months.

Oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, an International Energy Agency official told Reuters.

However, more stimulus measures that are expected to be unveiled by U.S. President-elect Joe Biden later in the day helped cap losses.

Also giving prices a boost was a reported move by Saudi Arabia, the world’s top oil exporter, to cut supplies of February-loading crude for some Asian buyers by up to a quarter.

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