Oil prices fell for a third day in a row to a two-week low on Wednesday on a surprise build in U.S. crude stockpiles, negative U.S. economic report and worries the spread of the coronavirus Delta variant will weigh on global energy demand.
Traders noted the oil price drop came despite reports of increased Mideast geopolitical tensions.
Brent futures fell $2.03, or 2.8%, to settle at $70.38 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $2.41, or 3.4%, to settle at $68.15.
That was the lowest close for both benchmarks since July 20.
The U.S. Energy Information Administration (EIA) said crude stockpiles rose by an unexpected 3.6 million barrels last week, while gasoline inventories fell by a bigger-than-forecast 5.3 million barrels. [EIA/S]
“Crude prices remained heavy after the EIA crude oil inventory showed stockpiles unexpectedly rose last week,” said Edward Moya, senior market analyst at OANDA, noting “the report was mixed as gasoline stockpiles fell more than expected.”
With U.S. gasoline futures near their highest since October 2014, the gasoline crack spread – a measure of refining profit margins – closed at to its highest since hitting a record in April 2020 when WTI settled in negative territory.
Coronavirus cases worldwide surpassed 200 million on Wednesday, according to a Reuters tally, as the more-infectious Delta variant threatens areas with low vaccination rates and strains healthcare systems.
The United States and China, the world’s two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious Delta variant that analysts anticipate will limit fuel demand at a time when it traditionally rises in both countries.
The World Health Organization is calling for a halt on COVID-19 vaccine boosters until at least the end of September as the gap between vaccinations in wealthy and poor countries widens.
Also weighing on oil prices was a report from ADP showing U.S. private payrolls increased far less than expected in July.
Tensions in the Mideast Gulf, meanwhile, gave oil prices some support.
On Tuesday, three maritime security sources claimed Iranian-backed forces seized an oil product tanker off the coast of the United Arab Emirates, though Iran denied the reports.
Oman on Wednesday identified the Panama-flagged Asphalt Princess as the tanker involved in a hijacking which Britain’s maritime trade agency earlier said was over.
This is the second attack on a tanker since Friday in the region, which includes the Strait of Hormuz. Britain and the United States are also blaming Iran for the earlier incident, in which drones crashed into the vessel and killed two sailors. Iran denies the reports.