Oil falls in New York after a surprising increase in Oil stocks in the United States fueled renewed fears about demand recovery as China battled the coronavirus comeback. Futures on the West Texas Intermediate fell 3.4 percent to their lowest level in more than two weeks. In just two weeks, the delta variety of Covid-19 has been found in nearly half of China’s 32 provinces, and citizens in at least 46 cities have been urged to avoid non-essential travel.
Meanwhile, according to government data, crude supplies in the United States surged by 3.63 million barrels, the largest increase since March. In response to worsening supply-demand fundamentals, key futures contract timespreads fell. After a slight gain in July, crude is having a difficult time in August. Tighter limitations in certain Asian countries to combat the virus’s spread risk reducing Oil demand at a time when the Organization of Petroleum Exporting Countries and its allies are gradually raising supply.
On Wednesday, the bleak demand forecast continued to erode timespreads in the US Oil market, despite the benchmark maintaining a positive backwardation structure in which near-dated prices trade at a premium to those farther out. On Wednesday, October futures were 44 cents a barrel higher than the November contract, compared to more than $1 a month ago.
The Energy Information Administration said that gasoline stockpiles in the United States declined 5.29 million barrels to their lowest level since November, but a measure of fuel demand, total products supplied, remained stable. Despite Beijing’s strict restrictions, the current outbreak has extended to the capital, with authorities taking steps Tuesday to ban rail travellers from 23 regions. This week, the financial centre of Shanghai also reported a viral infection. Analysts are re-evaluating their economic growth estimates as dangers rise.