Oil Futures Down as Crude Stocks Build, India's Cases Surge
WASHINGTON (DTN) -- In pre-inventory trade Wednesday, crude and refined products futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange eroded further, sending the front-month West Texas Intermediate June contract below $62 per barrel (bbl) as renewed strength in the U.S. Dollar Index and an unexpected build in U.S. crude stocks and gain in distillate stockpiles last week joined concerns over the near-term demand recovery after India -- the world's third largest oil consumer -- tightened mobility controls in the nation's most populous regions.
India now faces an uphill battle with the resurgent virus amid shortage of oxygen supplies in hospitals and inadequate vaccine access for its 1.4 billion people. On Tuesday, India reported its deadliest day of the pandemic after nearly a year contending with economic controls and restrictions on mobility. The nation's largest cities, New Delhi and Mumbai, announced this week new lockdown measures that are seen extending into adjoined regions amid a sharp uptrend in COVID-19 cases there.
India's Prime Minister Narendra Modi addressed the nation on Tuesday, warning of dark days ahead but ruled out the possibility of a second nationwide lockdown. However, new restrictions and the unknown nature of a 'second wave' of COVID-19 infections believed to have been triggered by a double mutant variant will likely weigh on the recovery outlook in the short term.
Only a few weeks earlier, the Organization for Economic Cooperation and Development raised projections for India's economic growth rate by 4.7% this year to 12.6%, making it the fastest growing economy in the world. These forecasts are now undoubtedly in question as the latest surge in COVID-19 infections already delayed reopenings and investment flow. Last month, India's crude consumption recovered to its pre-pandemic level according to the government data, with refiners processing 4.96 million barrels per day (bpd), up 1.8% from the previous month.
Further weighing on the oil complex, the American Petroleum Institute reported late Tuesday nationwide crude stockpiles unexpectedly gained during the week ended April 16 along with a build in distillate inventories while gasoline stocks fell compared with analyst expectations. The data showed crude oil supplies added 436,000 bbl versus an expected 2.4 million bbl draw while stocks at the Cushing, Oklahoma, delivery hub dropped 1.286 million bbl last week. Gasoline stockpiles fell 1.617 million bbl versus estimates for a 100,00 bbl build and distillate inventories added 655,000 bbl contrary to calls for a 400,000 bbl decline.
DTN Refined Fuels Demand data show U.S. diesel demand increased 4.2% from the previous week and now stands about 5% above the 2019 level while gasoline demand gained 0.4% week-on-week amid a seasonal uptrend.
In early trade, NYMEX June West Texas Intermediate contract declined 91 cents to trade near $61.74 bbl, while front-month ICE Brent crude for June delivery fell 87 cents to $65.70 bbl. NYMEX May ULSD futures dropped 2.27 cents to near $1.8574 gallon and May RBOB futures pulled back 2.20 cents to $1.9954 gallon.
The safe-haven U.S. dollar regained some strength in early trade Wednesday, trading at to 91.335 after falling to a more than six-week low at 90.840 Tuesday, suggesting investors are adopting a cautious stance on risk taking amid surging infections in some key emerging markets.
Liubov Georges can be reached at firstname.lastname@example.org