(New throughout, with market settlements)
By Barani Krishnan
Investing.com - U.S. crude prices plunged below the key $70 per barrel support on Wednesday, after a shock stockpile build added to COVID concerns that had been weighing on the market the past two days.
Crude stockpiles rose by 3.6 million barrels in the week to July 20 to 439.2 million barrels, the U.S. Energy Information Administration’s Weekly Petroleum Status Report showed. Analysts tracked by Investing.com had expected a drawdown of 3.1 million barrels instead.
The build came after an unusually large drop in U.S. crude exports, EIA data showed. Crude shipments fell beneath the long-breached 2 million barrels per day mark to reach 1.904 million barrels during the week to July 20 from the 2.489 million noted in the week to July 13.
New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, settled down $2.41, or 3.4%, at $68.15 per barrel. WTI has lost 4.5% in two previous sessions.
London’s Brent, the global benchmark for oil, settled down $2.03, or 2.8%, at $70.38. Brent lost 4% in the two previous sessions.
The weekly build in crude suggested that demand for energy might be slowing as COVID caseloads across the world were ramping again from the Delta variant of the virus.
Coronavirus cases worldwide surpassed 200 million on Wednesday, according to a Reuters tally, as the more-infectious Delta variant threatens areas with low vaccination rates and strains healthcare systems.
The United States and China, the world's two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious Delta variant that analysts anticipate will limit fuel demand at a time when it traditionally rises in both countries.
The World Health Organization is calling for a halt on COVID vaccine boosters until at least the end of September as the gap between vaccinations in wealthy and poor countries widens.
Adding to the bearish sentiment in oil were stockpiles of diesel-led distillates, which showed an unexpected build also, at 833,000 barrels against a forecast drop of 543,000 barrels.
The combined build in crude and distillates obliterated any positive impact from the outsized drawdown of gasoline, which fell by a whopping 5.29 million barrels versus expectations for a 1.780 million-barrel decline.
Gasoline has been the star of energy demand in 2021, responsible for the nine weeks of crude drawdowns since the first week of May that took nearly 50 million barrels off the market.
Even so, some analysts cautioned that gasoline consumption may have peaked for the session, with U.S. schools and colleges set to reopen soon.
“We may be seeing the last few big family road trips and weekend getaways, so I’d caution against expecting huge weekend declines in gasoline continuing like these week after week,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
Market participants also did not pay much heed to tensions in the Mideast Gulf, which would typically send oil prices soaring.
Three maritime security sources claimed Iranian-backed forces seized an oil product tanker off the coast of the United Arab Emirates on Tuesday, though Tehran denied the reports.
Oman on Wednesday identified the Panama-flagged Asphalt Princess as the tanker involved in a hijacking which Britain's maritime trade agency earlier said was over.
This is the second attack on a tanker since Friday in the region, which includes the Strait of Hormuz. Britain and the United States are also blaming Iran for the earlier incident, in which drones crashed into the vessel and killed two sailors. Iran has denied all the reports.