Oil prices drop on surprise rise in U.S. inventories, Bonny Light gains $1

Oil prices declined on Wednesday following a surprise increase in crude oil stockpiles in the U.S. and on continuous investor worries about fuel demand being weak as Europe introduced lockdowns to limit coronavirus spread.

Brent crude futures dipped by 15 cents or 0.3% to $50.61 a barrel at 08:50 West Africa Time, just as United States West Texas Intermediate (WTI) crude futures shed 13 cents or 0.3% to trade at $47.49 per barrel.

Bonny Light, Nigeria’s premium crude oil grade, rose by $1 or 2.02% to $50.45 at the previous session. Qua Iboe, another major national grade, was down by 47 cents or 0.93% at $50.05.

Oil prices have rebounded in the last couple of weeks, with Brent touching $51.06 on December 10, its peak since March.

“Crude oil prices are slightly softer after the API (American Petroleum Institute) inventory report posted a second consecutive build,” said Edward Moya, senior market analyst at OANDA.

Oil stocks increased by 2 million barrels in the week to 11^th December to around 495 million barrels, according to API. Analysts had anticipated a draw of 1.91 million barrels, according to a Reuters poll.

The dispensation of vaccines this month to combat the pandemic will not swiftly reverse the harm to global oil demand, International Energy Agency (IEA) said on Tuesday, casting gloom on significant oil prices recovery.

Read also: Oil prices surpass $50 over vaccine hopes; Bonny Light loses $0.17

The IEA lowered its forecasts for oil demand this year by 50,000 barrels per day (bpd) and for next year by 170,000 bpd, citing scarce use of jet fuel as fewer people travel by air.

“On the demand side, the biggest near-term downside risk to oil demand expectations is the United States, predominately due to persistent weaknesses in U.S. gasoline demand, given the current trajectory of COVID-19 in the country,” analysts at FGE wrote in a note.

Success on vaccine rollouts continued on Tuesday after Moderna Inc’s coronavirus vaccine seemed ready for U.S. regulatory approval this year, boosting the prospect of oil price recovery.

On Tuesday, the U.S. enlarged its rollout of the recently approved COVID-19 remedy developed by Pfizer alongside BioNTech SE to hundreds of extra distribution centres on Tuesday, inoculating thousands more healthcare workers in a mass immunisation anticipated to reach the general public in the months ahead.

U.S. congressional leaders also reported considerable advancement on Tuesday following two meetings of top Democrats and Republicans to halt a months-long stalemate on coronavirus relief and conclude a funding bill to prevent government shutdown, which could strengthen oil prices.