Oil prices slip after surprise hefty build in U.S. gasoline stocks

NEW YORK: Oil prices eased on Wednesday after U.S. gasoline inventories unexpectedly swelled, fanning fears that new coronavirus outbreaks will weaken the global recovery in fuel demand.

Brent crude futures lost 21 cents, or 0.3pc, to $62.53 a barrel by 11:15 a.m. EDT (1515 GMT) while U.S. West Texas Intermediate crude fell 25 cents, or 0.4pc, to $59.08.

U.S. crude stocks fell 3.5 million barrels last week, but gasoline inventories jumped 4 million barrels, the Energy Information Administration said, compared with expectations in a Reuters poll for a 221,000-barrel gasoline drop.

"The gasoline rise more than offsets the crude oil draw," said John Kilduff, partner at Again Capital in New York. "It shows you the issues remain in terms of demand for the complex."

Rising COVID-19 cases in the Americas, which accounted for more than half of all coronavirus-related deaths last week, could further hinder the demand outlook, Kilduff said.

Oil markets had rallied earlier in the year on expectations that vaccine distribution would help revive global economic demand.

Despite the struggles with vaccination in numerous countries, the International Monetary Fund on Tuesday said that unprecedented public spending to fight COVID-19 would push global growth to 6pc this year, a rate not achieved since the 1970s.

The global crude market could also face a supply increase as Iran and major world powers took steps toward reviving an agreement that froze Iran's nuclear weapons development.

Iran and world powers agreed to form working groups to discuss the possibility of reviving the 2015 deal that could lead to Washington lifting sanctions on Iran's energy sector and increasing oil supply.

"Iran is the single largest upside supply risk for the oil market," said Stephen Brennock of oil brokerage PVM.

Oil prices dropped earlier this week after the Organization of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, agreed to gradually ease oil output cuts from May.