Oil Extends Losing Run on U.S. Stockpile Gain, Demand Concerns

© Reuters. Oil Extends Losing Run on U.S. Stockpile Gain, Demand Concerns

(Bloomberg) -- Oil dropped for a third day after data showed a rise in U.S. stockpiles and investors fretted over an uneven recovery in global demand.

West Texas Intermediate fell 0.3% in early Asian trading following a tumble on Wednesday, when government figures showed the first expansion in American domestic crude stockpiles in a month. A flare-up in coronavirus cases in India, the world’s third-largest oil importer, is hurting consumption, offsetting positive signals from other economies including China and the U.S.

Crude’s run of losses is threatening to push prices back toward $60 a barrel, eroding gains last week that were underpinned by positive forecasts for energy demand from the International Energy Agency and Organization of Petroleum Exporting Countries. U.S. benchmark prices are still up more than 25% this year, however, while global benchmark Brent remains backwardated, a bullish pattern that suggests an underlying resilience.

The global picture -- and prospects for near-term energy demand -- are mixed. While vaccination drives are prompting greater activity and rising mobility in the U.S. and parts of Europe, the pandemic is tightening its grip elsewhere. More people were diagnosed with Covid-19 last week than in any other since the outbreak began, led by the rocketing numbers in India.

See also: Global Virus Resurgence Threatens Vigorous Growth Momentum

Highlighting the grim situation in South Asia, India on Wednesday reported a record 2,023 Covid-19 deaths, and an unprecedented 295,041 fresh cases. The dramatic surge has forced the nation’s financial and political capitals -- Mumbai and New Delhi -- to impose restrictions on movement.

Even as India is facing a crisis, however, other countries are mapping out plans to open up in a potential boost to oil demand. Among them, France will lift curbs on regional movement and reopen schools in coming weeks, and Greece will ease most lockdown measures in May ahead of its reopening to tourism.

Brent’s prompt timespread was 65 cents a barrel in backwardation on Wednesday, up from 40 cents at the start of April. That’s a bullish pattern, with near-term prices trading above those further out.

©2021 Bloomberg L.P.