WTI and Brent crude oil contracts plunged 7% on Thursday, posting their sharpest one-day decline since last November 2020, amid the growing worries for weaker oil demand after the recent surge in new Covid-19 cases in Europe, coupled with the rising US fuel stockpiles.
New York-traded WTI crude (West Texas Intermediate), the benchmark for crude oil in North America (USA-Canada) fell to as low as $58/b before bounced near $60/b or down -7%, posting its sharpest one-day decline since last November 2020. The WTI oil contract has lost 8% since the beginning of the week, and 12% or $8/b since it topped at $68/b on March 08, 2021.
London-traded Brent crude, the international benchmark for crude oil (approx. the 75% of global oil supply) also lost more than 7% of its value yesterday, settling near $63/b, after it posted an intraday low near $61.50/b.
Bearish fundamentals weigh on oil prices:
Energy investors have taken some money or profits away from the crude contracts this week, as the crude fundamentals deteriorated, adding to the concerns about the global demand recovery after the pandemic.
The demand for petroleum products is under threat in Europe, as the continent sees the rise of a third wave of the Covid-19 pandemic, coupled with the “out of the schedule” vaccination campaign in the bloc. Numerous European countries have paused the use of AstraZeneca's COVID-19 vaccine due to worries over possible side effects.
The number of confirmed coronavirus cases in Italy, Greece, Germany, and other EU countries jumped to the most this week, forcing some of them to increase the social restriction measures or to extend local lockdowns to limit the spread of the virus.
The recent rally in crude oil prices capped a few days ago after the release of the latest monthly report from the IEA (International Energy Agency), which said a super-cycle was questionable, while the petroleum demand will not return to pre-pandemic levels until 2023.
Larger-than-expected build on US fuel stockpiles:
Adding to the pandemic-led global oil demand concerns, the US EIA agent (Energy Information Administration) announced on Wednesday a larger-than-expected build in crude and gasoline stockpiles for last week.
The US fuel inventories have been building since mid-February after the major refineries in Texas were forced to shut down production or limit capacity due to extreme cold weather in the region.
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