Oil prices ease on surprise build in U.S. inventory, demand worries

Oil prices dropped on Wednesday on a surprise gain in crude oil inventories in the United States and as investors continued to worry about demand for fuel being squeezed amid tighter lockdowns in Europe to counter the coronavirus pandemic.

Brent crude futures fell 11 cents or 0.2 per cent to $50.65 a barrel at 0421 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell nine cents or 0.2 per cent to $47.53 a barrel.

“Crude 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.

Crude inventories swelled by two million barrels in the week to Dec. 11 to about 495 million barrels, according to industry group API.

Analysts had expected a draw of 1.9 million barrels, according to a Reuter’s poll.

Official government data was scheduled for Wednesday.

The rollout of vaccines this month to combat the coronavirus pandemic will not quickly reverse the destruction wrought on global oil demand, International Energy Agency (IEA) warned on Tuesday.

The IEA revised down its estimates for oil demand this year by 50,000 barrels per day (bpd) and for next year by 170,000 bpd, citing scarce jet fuel use 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.

Still, progress on vaccine rollouts continued on Tuesday after Moderna Inc’s COVID-19 vaccine appeared set for U.S. regulatory authorisation this week.

The U.S. also expanded, on Tuesday, its rollout of the newly approved COVID-19 vaccine developed by Pfizer Inc and German partner BioNTech SE to hundreds of additional distribution centres on Tuesday, inoculating thousands more healthcare workers in a mass immunisation expected to reach the general public in the coming months.

U.S. congressional leaders also reported substantial progress on Tuesday after two meetings of top Democrats and Republicans to end a months-long standoff on coronavirus relief and finalise a funding bill to avert a government shutdown.