Oil prices headed modestly lower Thursday morning, with the commodity’s retreat being attributed, at least partly, to a delayed reaction to a bigger-than-expected increase in U.S. gasoline stocks, which suggests slack in energy demand.
The Energy Information Administration on Wednesday reported that gasoline supply was up by 4 million barrels, while distillate stockpiles climbed 1.5 million barrels for the week. IHS Markit had forecast weekly supply increases of 200,000 barrels for gasoline and 500,000 barrels for distillates.
“Seeing US gasoline stocks rising by 4 million barrels last week caused some wows on trading floors as a boost in gasoline demand was expected due to Easter holiday mobility,” wrote Bjørnar Tonhaugen, head of oil markets at Rystad Energy, in a daily note.
“A huge build in road fuel stocks is not what the market was expecting and concerns over the speed of the oil demand recovery resurfaced, leaving traders wondering how stable road fuel usage actually is,” the analyst wrote.
West Texas Intermediate crude for May delivery
was off 47 cents, or 0.8%, to trade at $59.30 a barrel on the New York Mercantile Exchange, following a 0.7% gain on Wednesday.
June Brent crude
the global benchmark, gave up 18 cents, or 0.3%, to trade at $62.98 a barrel on ICE Futures Europe after the contract rose 0.7% a day ago.
Oil prices ended slightly higher on Wednesday after an initial retreat in values but investors may be rethinking the state of inventories and demand.
Not everyone is sold on the notion that the increase in gasoline supplies bodes ill for overall energy demand because a rise in gasoline stocks could also be linked to increased utilization in oil refineries, experts say.
However, Tonhaugen said that concerns about the efficacy of AstraZenca in helping achieve a greater economic reopening in Europe may also be weighing on energy markets.
Spain and Italy have said they are limiting the use of AstraZeneca’s AZN COVID-19 vaccine due to fears of very rare cases of blood clotting issues in adults. On Wednesday, the European Medicines Agency (EMA) said it found a possible link between the vaccine and clotting.
The decision to restrict the use of the shot comes after Germany and France took similar measures. The restrictions could make it harder for the European Union to achieve its target of vaccinating 70% of its adult population by the end of the summer, some fear.
“Europe is a prime user of the AstraZeneca vaccine and any delays or pauses in the vaccination campaigns could partly postpone the oil demand recovery in the continent,” the Rystad analysts said.