Oil prices drop after U.S. fuel stockpiles rise

Brent crude futures dropped 9 cents, or 0.11%, to $79.91 a barrel, while U.S. WTI crude futures shed 13 cents, or 0.17%, to $76.86 a barrel

Oil prices dropped on Wednesday after U.S. fuel stockpiles climbed, indicating declining demand in the world’s biggest oil consumer amid a massive spike in COVID-19 cases caused by the Omicron variant.

Brent crude futures dropped 9 cents, or 0.11%, to $79.91 a barrel at 0537 GMT, while U.S. West Texas Intermediate (WTI) crude futures shed 13 cents, or 0.17%, to $76.86 a barrel.

U.S. gasoline stockpiles rose by 7.1 million barrels in the week to Dec. 31, the American Petroleum Institute (API) reported late on Tuesday. Distillate stockpiles jumped by 4.4 million barrels in the week.

The surging stockpiles, which exceeded analysts’ expectations, undermined the bullish outlook from investors during the previous session when price jumped more than 1% as market participants took the decision of major producers to add supply next month as a sign of confidence that surging COVID-19 cases would not hit demand for long.

Rising U.S. production as more and more producers find it lucrative to return to the well pad is weighing on oil prices, Sugandha Sachdeva, vice president of commodities research at Religare Broking said.

Meanwhile, the Organization of the Petroleum Exporting Countries, Russia and allies, known as OPEC+, on Tuesday agreed to add another 400,000 barrels per day of supply in February, as it has every month since August.

The decision to stick to their output increase reflected the group’s view that Omicron will only have a short-lived impact on global energy demand.

Two consecutive days of strong gains have put crude in over-bought territory, said Vandana Hari, founder of Vanda Insights, provider of oil market analysis. Market sentiment will continue to see-saw.