U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday. Reuters is reporting that crude oil producers from Europe, Africa and the United States faced difficulties selling to Asia, especially China, as buyers took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said on Thursday.
Chinese independent refiners, which account for a fifth of the country’s imports, have slowed imports in the second quarter because of refinery maintenance, strong Brent prices and a large influx of supplies, including Iranian oil, in the first quarter, Reuters reported.
As a result traders were forced to sharply reduce prices for spot cargoes loading in April and May from Europe, Africa and the United States for delivery to Asia.
Bearish traders are also citing fresh coronavirus pandemic lockdowns for the weakness. Meanwhile, traders are eyeing the grounded ship in the Suez Canal potentially blocking 10 tankers carrying 13 million barrels of oil.
US Crude, Fuel Stocks Rise in Most Recent Week
U.S. crude stocks, gasoline and distillate inventories rose last week, the Energy Information Administration (EIA) said on Wednesday.
Crude inventories rose by 1.9 million barrels in the week ended March 19 to 502.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 272,000-barrel drop.
U.S. gasoline stocks rose by 203,000 barrels in the week to 232.3 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 1.2 million-barrel rise.
Distillate stockpiles, which include diesel and heating oil, rose by 3.8 million barrels in the week to 141.6 million barrels, versus expectations for a 122,000-barrel drop, the EIA data showed.
Traders may be watching the Suez blockage, but that is a short-term supply concern. The key issue driving the price action is demand. Traders are clearly worried about the pace of the demand recovery because of the rising number of COVID-19 cases.