Oil Falls 2% as Inventories Rise and Vaccine Rollout Stalls

By Julia Payne

Brent crude fell $1.47, or 2.16%, to $66.53 a barrel by 1341 GMT. U.S. oil was down $1.50, or 2.32%, at $63.10 after shedding 0.3% in the previous session. Both contracts are down more than 4% over the past five days.

“Short-term developments – stuttering vaccine rollouts and the build in U.S. oil inventories – are driving sentiment, but the longer-term oil outlook is still encouraging,” said PVM Oil Associates analyst Tamas Varga.

“Yesterday’s U.S. Federal Reserve meeting provided a boost to equities … U.S. economic growth has been revised upwards while unemployment is expected to decline.”

A sharp rise in the value of the dollar after the Fed meeting has also driven the oil sell-off.

Government data on Wednesday showed U.S. crude inventories have risen for four straight weeks after severe cold weather forced shutdowns at refineries in the south. An industry report estimating a decline had raised hopes of a halt to the gains.

U.S. crude inventories rose by 2.4 million barrels last week, the U.S. Energy Information Administration (EIA) said on Wednesday, a day after the American Petroleum Institute (API) estimated that there had been a 1 million barrel decline.

Varga added that the market would waiting for U.S. manufacturing data next week for further indications on the health of the world’s largest economy.

“Lower crude demand from Asian buyers as a result of upcoming refinery maintenance and probably higher prices is also something not helping crude at the moment,” said UBS commodity analyst Giovanni Staunovo.

A slowdown in some vaccination programmes and the prospect of more restrictions to control the coronavirus have tempered expectations for a recovery in fuel use.

Britain said on Thursday that global supply bumps meant its vaccine rollout would be slower than hoped in the coming weeks but it expects deliveries to increase from May.

A number of European countries have halted use of the AstraZeneca shot because of concerns about possible side effects, though the World Health Organization said that Europe should continue to use the vaccine.

(Reporting by Julia Payne and Aaron Sheldrick; Editing by David Goodman)