U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure Wednesday as the coronavirus pandemic continues to slow economic growth and oil demand while Saudi Arabia and Russia kept up their battle for market share with an aggressive price war.
Countries including the United States and Canada, along with nations in Europe and Asia have been taking unprecedented steps to contain the virus. Demand destruction continued as numerous governments have told residents to restrict their movements while businesses shutter, curbing demand for fuels. Meanwhile, no one is sure how long the demand growth slowdown will last.
Furthermore, the removal of supply limits by OPEC and other producers, including Russia, when a deal by the so-called OPEC+ fell apart in early March.
Saudi Arabia plans to boost exports, although they have yet to increase in March, sources at companies that track oil flows said on Monday.
“The extreme imbalance between supply and demand due to the travel restrictions has only just begun to unfold in the physical markets, and the true impact will be felt in the coming weeks,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen, in a note.
American Petroleum Institute Weekly Inventories Report
Late Tuesday, the API reported that crude inventories fell by 1.2 million barrels in the week-ending March 20 to 451.4 million barrels. Analysts were looking for a build of 2.8 million barrels.
Gasoline and distillate stocks also fell last week. The API reported a large draw of 2.622 million barrels of gasoline. Analysts were looking for a 657,000-barrel draw for the week.
Distillate inventories were also down, by 1.90 million barrels for the week. Cushing inventories rose 1.066 million barrel.
The selling picked up after the U.S. Energy Information Administration reported a rise in crude oil inventories. Crude inventories rose by 1.6 million barrels in the week-ended March 20 to 455.4 million barrels. Traders were expecting a 2.8 million-barrel rise. Inventories have risen for nine straight weeks, and are expected to keep rising in coming weeks as fuel demand declines and refineries pare back activity.
U.S. gasoline stocks fell by 1.5 million barrels last week to 239.3 million barrels, the EIA said, compared with analysts’ expectations for a 657,000-barrel drop.
Refiners have been running down their stocks of gasoline and diesel fuel to their lowest level since December, in anticipation of coming weeks of slack demand.
This article was originally posted on FX Empire
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