U.S. crude oil supply is surplus, but COVID-19 still poses a threat to demand Investing.com

© Reuters.

Gina Lee

Investing.com-Oil prices rose in early Asian trading on Wednesday, aided by expectations that fuel demand will exceed supply growth. However, the increasing number of COVID-19 cases around the world limits the benefits of black liquid.

As of 11:26 pm Eastern Time (3:26 am GMT), the stock rose 0.65% to US$74 after falling 2 cents in the previous trading day, the first decline in six days. It rose 0.77% to US$72.20, reversing the 0.4% drop on Tuesday.

It shows that crude oil inventories for the week ended July 23 were 4.728 million barrels. The forecast compiled by Investing.com had forecast crude oil inventories at 3.433 million barrels, compared with 806,000 barrels reported in the previous week.

Investors are waiting now, due later in the day.

OANDA analyst Edward Moya said in a report: “Most energy traders are not worried about the growth of the previous week, so expectations for EIA crude oil inventory data should be high to confirm that the inventory has resumed the downward trend.”

API data also claimed a decrease of 6.226 million barrels.

“The United States is still at the peak of driving, and everyone is trying to make the most of this summer,” Moya said in his notes.

As major countries in the market continue to recover their economies from COVID-19, global inventories are expected to tighten for the remainder of 2021. However, the number of cases involving the Delta variant of the virus has surged, causing many countries to re-implement restrictions. Black liquid will record a loss for the second month since October 2020.

Refineries have earned some of the best profits over the years, but continue to be challenged by the increasing number of COVID-19 cases and their impact on the outlook for fuel demand. Concerns that renewed weak demand may lead to inventory inflation and re-squeeze profits are hindering processors’ desire to make profits.

“The biggest risk to oil prices is still the Delta variant of COVID-19, and many countries are still accepting the outbreak,” Suvro Sarkar, responsible for group research in the energy department of DBS Bank Ltd., told Bloomberg.

However, “current demand in the US and Europe should continue to support prices,” he added.

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