Crude Oil Lower Amid Growing Demand Worries

Crude oil prices weakened Thursday amid concerns about fuel demand as the pandemic continues after U.S. inventories posted an unexpected rise last week.

By 9:45 AM ET (1445 GMT), U.S. Crude futures were down 0.6% at $52.97 a barrel, while Brent futures were down 0.5% at $55.79 a barrel.

U.S. Gasoline RBOB Futures were down 0.8% at $1.5315 a gallon.

Data released late Wednesdy by the industry group, the American Petroleum Institute showed that {{8849|U.S. crcrude oil inventories rose 2.6 million barrels in the week to Jan. 15, against expectations for a 300,000-barrel draw in forecasts prepared by Investing.com.

The U.S. Energy Information Administration is due to release its official weekly inventory report on Friday, later than usual due to Monday’s holiday. If these numbers show a similar crude oil build, it would be the first since early December.

Weighing on the market is the fear that the surge of Covid-19 cases is having a direct impact on the demand for crude oil, not only in the U.S. but also around the globe.

Earlier this week the International Energy Agency, a Paris-based autonomous intergovernmental organization, revised lower its global demand estimates for the year by 300,000 barrels a day as a result of a fresh wave of lockdowns, particularly in China, the largest importer of crude in the world.

“The most recent has been in Beijing, specifically the Daxing district, which has affected around 1.6m people,” said analysts at ING, in a research note. “The government will be keen to get any outbreaks under control, particularly with the Chinese New Year fast approaching.”

On the supply side, newly inaugurated President Joe Biden has announced his decision to cancel the Keystone XL pipeline project, which would have carried more than 800,000 barrels a day of crude from Alberta’s oil sands in Canada as far south as the U.S. Gulf Coast.

Additionally, ING noted that Shell (LON:RDSa) has lifted force majeure on exports of Forcados crude from Nigeria, a measure which had been in place since Jan. 14, after the pipeline to the Forcados oil terminal was shut due to a leak.