Oil prices drop 2% on US crude build, Covid-19 surge in India

[NEW YORK] Oil prices on Wednesday fell for a second day to their lowest in a week on a surprise build in US crude inventories and concerns surging Covid-19 cases in India will drive down fuel demand in the world's third-biggest oil importer.

Brent futures settled US$1.25, or 2 per cent, lower at US$65.32 a barrel, while US West Texas Intermediate (WTI) crude for June fell US$1.32, or 2.1 per cent, to US$61.35. The new WTI June front-month was down about 1.8 per cent from where the May contract expired on Tuesday.

For both contracts, this was the lowest close since April 13.

"Oil prices are declining today as ... bearish developments forced traders to ignore a partial but bullish Libyan force majeure on exports," said Louise Dickson, oil markets analyst at Rystad Energy.

She pointed to the build of in US crude inventories and a continuous rise of Covid-19 infections in India and other countries.

India, the world's third-largest oil user, on Wednesday reported another record increase in the daily death toll from Covid-19.

US crude oil stockpiles unexpectedly edged higher last week, the Energy Information Administration said on Wednesday, confirming data by the American Petroleum Institute the day before.

Crude inventories rose by 594,000 barrels last week to 493 million barrels, compared with analysts' expectations in a Reuters poll for a 3 million-barrel drop.

US East Coast inventories, however, fell to a record low at 7.9 million barrels.

Raising the possibility of further oil supply, Iran and world powers have made headway in talks to save a 2015 nuclear accord, which, if successful, could see sanctions lifted and more Iranian barrels return to the market.

The Organization of the Petroleum Exporting Countries and their allies including Russia, a group known as Opec+, are heading for a largely technical meeting next week where major changes to policy are unlikely, Russian Deputy Prime Minister Alexander Novak and Opec+ sources said.

Mr Novak said on Wednesday the group may confirm or tweak output plans following its decision to ease production curbs.

In Libya, meanwhile, the country's National Oil Corp (NOC) declared force majeure on Monday on exports from the port of Hariga and said it could extend the measure to other facilities due to a budget dispute with the country's central bank.

REUTERS