Oil prices drop as US gasoline stocks and Covid-19 cases increase

22 October 2020 (Last Updated October 22nd, 2020 13:24)

Oil prices fell following an increase in US gasoline stocks and a surge in coronavirus (Covid-19) cases in North America and Europe, which has dimmed the hopes of a recovery in fuel demand.

Oil prices drop as US gasoline stocks and Covid-19 cases increase
Gasoline inventories in the US grew by 1.9 million barrels in the week ending 16 October, according to EIA. Credit: John R Perry from Pixabay.

Oil prices fell following an increase in US gasoline stocks and a surge in coronavirus (Covid-19) cases in North America and Europe, which has dimmed the hopes of a recovery in fuel demand.

US West Texas Intermediate (WTI) crude futures dropped by $0.27 to $39.76 a barrel at 0127 GMT, while Brent crude futures fell $0.21 to reach $41.52 a barrel, reported Reuters.

Gasoline inventories in the US grew by 1.9 million barrels in the week ending 16 October, according to the Energy Information Administration (EIA) as against expectations of a drop by 1.8 million barrels.

National Australia Bank head of community research Lachlan Shaw said: “The latest EIA report showed an unexpected increase in gasoline inventories, which came at the same time as reduced gasoline output because of refinery outages due to Hurricane Delta. So the implication is gasoline demand is pretty soft.”

New Covid-19 infections are hitting records daily in several US states and in Europe, leading to new lockdowns. Furthermore, China has restricted overseas travel to control the spread of the disease. All these have increased the concern over recovery in fuel demand.

ANZ Research was quoted as stating: “The resurgence in coronavirus cases is seeing the US motorist increasingly putting the brakes on. This makes the negotiations on a US stimulus package even more important.”

However, hopes of US lawmakers coming to a deal on an economic stimulus package were affected after President Donald Trump alleged that Democrats were not supporting the deal.