Oil slipped for a fourth day on Wednesday weighed by concerns about weaker demand in Europe and rising U.S. crude inventories.
Several European countries have paused the use of AstraZeneca’s COVID-19 vaccine on worries over possible side effects. Germany is seeing rising coronavirus cases, Italy is imposing a nationwide Easter lockdown and France plans to impose tougher curbs.
“The suspension will not do the bloc’s economic and fuel recovery any favours,” said Stephen Brennock of oil broker PVM. “The hope now is that Europe can get its sluggish vaccine rollout back on track.”
Brent crude was down 44 cents, or 0.6%, at $67.98 a barrel, while U.S. West Texas Intermediate (WTI) crude settled 20 cents, or 0.3%, lower at $64.60 per barrel.
Prices slipped towards session lows after government data showed U.S. crude inventories rose 2.4 million barrels last week, following Tuesday’s industry report estimating a 1 million barrel-drop. Analysts had forecast an increase of 3 million barrels.
U.S. crude inventories have risen for four straight weeks after refinery operations in the south were hampered by unusual and severe cold weather last month. Companies are slowly restarting facilities and balances are expected to restored over the next couple of weeks, analysts said.
“Over three-quarters of last week’s 1.1 million barrel-per-day increase in refinery runs occurred on the Gulf Coast. Another rise in refining activity in next week’s report should usher us back to a trend of inventory draws,” said Matt Smith, director of commodity research at ClipperData.
Further adding pressure to prices, the International Energy Agency said in its monthly report that oil prices are unlikely to mount a dramatic and sustained surge despite vaccines expected to boost demand later this year. The Paris-based energy watchdog said demand is not expected to return to pre-pandemic levels until 2023.
“IEA’s report has triggered action among oil traders,” said Naeem Aslam of Avatrade. “We have seen some selling.”
Oil has recovered from historic lows reached last year as demand collapsed, buoyed by record oil output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Brent reached $71.38 on March 8, its highest since Jan. 8, 2020.
A rising dollar ahead of the U.S. Federal Reserve’s announcement was also a headwind for oil because a stronger dollar makes crude more expensive for holders of other currencies.
Investors are also looking to the results of the central bank’s Federal Open Market Committee meeting. No policy shift is expected.