MELBOURNE/SINGAPORE: Oil prices dropped more than 1% on Wednesday after an industry report showed an unexpected rise in U.S. crude oil inventories, and President Donald Trump rattled markets by threatening not to sign a long-awaited U.S. COVID-19 relief bill.
Brent crude futures fell 71 cents, or 1.4%, to $49.37 a barrel at 0646 GMT, while U.S. West Texas Intermediate (WTI) crude futures slid 67 cents, or 1.4%, to $46.35 a barrel. Both contracts fell nearly 2% on Tuesday, already a second straight session of declines.
As well as doubts on the U.S. situation, the oil market remains jittery about the future recovery of demand as a new, highly infectious strain of the novel coronavirus has hit Britain, prompting much of the world to shut its borders to the country.
“This is the holiday period, when people go out and that prompts fuel demand. But now, a majority of flights have been cancelled to and from the UK, so this is going to impact oil demand (overall),” said Ravindra Rao, vice president, commodities at Kotak Securities.
“Sometime earlier, the expectation was that the virus threat was subsiding, and demand was slowly and slightly moving higher. But with this update of the new coronavirus strain, the market is purely operating on sentiment right now that it is going to create more restrictions.”
The American Petroleum Institute (API) reported on Tuesday that U.S. crude inventories have risen by 2.7 million barrels in the week to Dec. 18, compared with analysts’ expectations for a draw of 3.2 million barrels.
“Rubbing salt in the oil market wounds today, oil prices lurched lower after yet another inventory build that was very much bearish to consensus,” Axi chief market strategist Stephen Innes said in a note.
Oil also took a hit after Trump threatened not to sign an $892 billion coronavirus relief bill, saying he wants Congress to increase the amount in the stimulus checks which lawmakers approved on Monday.
COVID-19 cases continued to surge in the United States, with more than a million new cases in just six days, and Americans were warned again to avoid travelling for Christmas, further dampening fuel demand.
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