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Crude Oil Lower Amid Global Demand Recovery Worries

Published 03/18/2021, 10:00 AM
Updated 03/18/2021, 10:01 AM
© Reuters.

By Peter Nurse   

Investing.com -- Crude oil prices weakened Thursday amid doubts about the speed of the global oil demand recovery following another increase in U.S. crude inventories.

By 9:00 AM ET (1400 GMT), U.S. crude futures traded 2.2% lower at $63.14 a barrel, while the international benchmark Brent contract fell 2.3% to $66.43. 

U.S. Gasoline RBOB Futures were down 1.6% at $2.0135 a gallon.

The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, with 770,000 claiming, up from 725,000 in the prior week, according to official data released Thursday.

Although the labor market is regaining its footing as the ramped-up vaccination program leads to more U.S. businesses reopening, these figures suggest that this will be a drawn-out process in crude’s biggest consuming market.

In Europe the situation is more worrying, as a third wave of the coronavirus pandemic builds on the back of a very sluggish vaccination program in the region.

The number of confirmed coronavirus cases in Germany, the European Union’s largest country by population, jumped by over 17,000, the biggest daily rise since Jan. 22, data from the Robert Koch Institute for infectious diseases showed on Thursday.

This increases the potential for extended mobility restrictions, something that is already happening in Italy, with large parts of the country back in lockdown. 

Adding to concerns about the recovery of demand, the International Energy Agency released its Oil 2021 report on Wednesday, which offered little support.

“The numbers suggest that the IEA feels that Covid-19 will have an impact on long term demand, with 2025 demand estimated at 103.2MMbbls/d, which is 2.5MMbbls/d lower than the forecast from last year, said ING, in a research note.

Back in the U.S., official data from the Energy Information Administration late Wednesday showed crude inventories increased by 2.4 million barrels last week, growing for four straight weeks after refineries in the South were forced to shut due to severe cold weather. 

This came as something of a surprise after an industry body, the American Petroleum Institute on Tuesday estimated a 1 million barrel-decline in these inventories.

“Refiners continue to bring back capacity after the freezing conditions in February, with utilisation rates increasing by 7.1 percentage points over the week, to leave them at 76.1%. However, this is still below the 83.1% we saw ahead of the big freeze,” ING added.


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