Americas News
European Vaccine Suspensions, Rising U.S. Inventories, Drive Crude Prices Down
Wednesday marked another session of price losses for crude, driven by Europe's lacklustre Covid vaccine rollout and a rise in U.S. crude inventories, albeit less than analysts had predicted.
Brent settled down 39 cents at $68 per barrel while West Texas Intermediate dropped 20 cents to end at $63.68.
Although a robust vaccination program continues to yield significant drops in infection rates in the U.S., UK, and other countries, several European nationss have paused the use of the AstraZeneca vaccine on worries over possible side effects, and this in turn has caused analysts to fret about demand recovery.
Stephen Brennock, oil analyst at PVM said, “The suspension will not do the bloc’s economic and fuel recovery any favours; the hope now is that Europe can get its sluggish vaccine rollout back on track.”
As for the U.S. inventory build, it rose 2.4 million barrels last week compared to predictions of a 3 million barrel increase, but Matt Smith, director of commodity research at ClipperData, said that "Another rise in refining activity in next week’s report should usher us back to a trend of inventory draws.”
Analysts are also concerned about a disconnect between the four-month surge in the futures price of crude and slow physical sales - with global demand expected to match supply only later in 2021.
Marc Rowell, senior energy broker at Britannia Global Markets, said, “A key contributor to the ongoing volatility is speculative non-physical trading in the futures market; until there is a change in momentum and price stability in line with the physical market, volatility is here to stay.”
For its part, the International Energy Agency on Wednesday trotted out the familiar theory that gasoline demand may have already peaked: in its Oil 2021 five year outlook it stated that increased gasoline use in developing countries will be offset by rising fuel efficiency and a switch to electric vehicles in wealthy nations, and that gasoline demand may in fact have peaked in 2019.
The IEA also predicted that oil demand won't hit pre-pandemic levels until 2023, with growth thereafter subdued amid new working habits such as doing business from home.
