Oil prices drifted lower at the mid-week trading session in London.
At the time of writing this report, Brent oil futures were down by 1.06% to $49.30 thereby dropping below the $50 mark. West Texas Intermediate futures lost over 1.5% to trade at $46.23.
The plunge in crude oil prices is largely due to a surge in U.S. crude oil stockpiles and the travel restrictions put in place to limit a new mutant strain of the COVID-19 virus, putting pressure on already weak fuel demand.
Tuesday’s data from the American Petroleum Institute printed a gain of 2.7 million barrels in U.S. crude oil supply for the week ending Dec. 18. The build was larger than the 3.25-million-barrel draw in forecasts prepared by energy experts and the previous week’s build of 1.973 million barrels.
In a note, Chief Global Market Strategist at Axi, Stephen Innes spoke on recent fundamentals prevailing in the oil market:
“And rubbing salt in the oil market wounds today, oil prices lurched lower, after yet another inventory build that was very much bearish to a consensus to what was penciled in by analysts.
Oil traded lower again overnight with worries over the new virus variant and restricted mobility in most of Europe as demand fear resurfaces travel restrictions. And to assume this could be an isolated UK event might be unwise.”
The oil cartel is expected to ensure that its crude oil production capacity meets the prevailing energy demand. However, the present situation highlights oil bears having a grip on the black liquid hydrocarbon market, at least for the near term until the COVID-19 caseloads get subdued.