Oil dips on demand worries despite surprise drop in US crude stocks

MELBOURNE: Oil prices slipped for a fourth day on Wednesday on worries about rocky demand in Europe, even as hopes of a recovery in U.S. refinery activity were boosted by industry data that showed U.S. crude stockpiles unexpectedly fell last week.

U.S. West Texas Intermediate (WTI) crude futures dipped 5 cents to $64.75 a barrel at 0229 GMT, after climbing as much as 28 cents in early trade.

Brent crude futures fell 10 cents, or 0.2%, to $68.29 a barrel, after initially gaining as much as 23 cents.

The market has been drifting lower over the past few days amid concerns about stalled vaccine rollouts slowing a recovery in fuel demand.

“Concerns that demand could fall further have been rising as Europe’s health ministers suspend the rollout of AstraZeneca vaccine amid health concerns,” ANZ Research said in a note.

While demand is growing in India and the United States, it remains weak in Europe, ANZ said, noting that France’s road fuel consumption fell 10.8% in February from a year earlier, according to the country’s petroleum industry federation UFIP.

On the positive side, U.S. crude inventories fell by 1 million barrels in the week to March 12, according to trading sources citing data from the American Petroleum Institute. Analysts in a Reuters poll had expected a build of 3 million barrels,

“The market was wrong-footed but still pleasantly surprised after U.S. oil stockpiles unexpectedly fell last week,” said Stephen Innes, chief global market strategist at Axi.

At the same time, gasoline stocks fell less than expected, declining by 926,000 barrels, compared with estimates for a draw of 3 million barrels.

The “narrower weekly draw in gasoline stocks signalled that refiner activity was normalizing after a big freeze in Texas smothered production in the previous month,” Innes said in a note.

The historic icy spell in the southern U.S. states knocked out nearly a quarter of the country’s refining capacity last month.

Traders will be looking for confirmation of the drawdown in crude stocks in official data due from the Energy Information Administration due on Wednesday.