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Oil prices drop amid rise in U.S. crude inventories, Bonny Light adds $0.46

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Oil prices fell on Wednesday following an industry report that revealed a surprise build in the United States crude oil stocks, and as President Donald Trump upset markets by issuing threats not to endorse a long-awaited COVID-19 stimulus bill.

Brent crude futures eased by 38 cents or 0.8% to $49.70 per barrel at 09:14 West Africa Time, just as U.S. West Texas Intermediate (WTI) crude futures slid by 40 cents or 0.9% to $46.62. The two contracts declined by almost 2% on Tuesday in a second successive session of losses.

Bonny Light, Nigeria’s premium oil grades, appreciated by $0.46 or 0.93% to close at $50.06 a barrel at Tuesday’s session. Qua Iboe, another key national oil grade, fell by $0.40 or 0.80% to $49.40 in early trading on Wednesday.

Oil markets are also in a panic regarding the future rebound of demand as a fresh, highly contagious variant of the coronavirus has hit the United Kingdom, causing much of the world to close its borders to Britain, with adverse implications for oil prices.

Ravindra Rao, vice president of commodities at Kotak Securities, said “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),” and, by extension, oil prices.

“Sometime earlier, the expectation was that the virus threat was subsiding, and demand was slowly and slightly moving higher. But with this … new coronavirus strain, the market is purely operating on sentiment right now that it is going to create more restrictions.”

Read also: Oil prices fall as new coronavirus strain stokes demand fears, Bonny Light loses $2.14

Kotak Securities said the immediate support for Brent was near $49 per barrel. Any close below that level might result in a loss of $46, it added.

The American Petroleum Institute (API) reported on Tuesday that U.S. crude stocks jumped by 2.7 million barrels in the week to 18th December, contrary to Reuters analysts anticipation for a draw of 3.2 million barrels, thus weakening oil prices.

“The repricing of the COVID-19 reality in the world continued unabated in oil markets overnight, with U.S. API crude inventories showing a surprise climb, and adding to the gloom,” said Jeffrey Halley, senior market analyst at OANDA.

Oil prices also took a bashing from after Trump issued a threat not to sign an $892 million COVID-19 relief bill, saying he wants Congress to raise the sum in the stimulus checks that legislators approved on Monday.

Coronavirus cases continued to rise in the United States, with more than a million new infections in just six days, and Americans were advised to shelve Christmas travel, further dampening fuel demand.

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