Oil prices plunged about two percent on Wednesday, giving up most of the previous day’s gains, as the U.S. crude stocks recorded an unexpected surge.
Brent crude, which climbed nearly two per cent to sell at $40.87 on Tuesday slipped 1.8 per cent at $40.44 a barrel. U.S. oil suffered a worse hit as it fell 2.3 per cent to sell at $38.67 a barrel.
Data from Industry Group, an American petroleum institute, showed that U.S. crude oil and gasoline stocks rose last week while crude inventories surged by 4.6 million barrels to about 495.2 million barrels against analysts’ expectations.
Hiroyuki Kikukawa, general manager of research at Nissan Securities, Japan said the unforeseen build up in U.S. crude stocks prompted fresh selling.
Kikukawa also pointed out that the rising COVID-19 cases and the continuous indecision by the U.S to actualise its anticipated coronavirus fiscal relief package also dented investors’ risk appetite. The gloomy sentiment is expected to keep prices under pressure through the November 3 U.S. presidential election.
Despite renewed efforts to control the resurging COVID-19, the United States, Russia, France and other countries have registered record numbers of infections in recent days, another blow to the supply-demand flow of oil resulting in a wobbling oil price.
Henning Gloystein, director of global energy & natural resources at Eurasia Group, New York is pessimistic the black gold will rebound anytime soon.
According to him, with and without another lockdown, movement across Europe and North America will drop during the coming winter months as most people avoid travel and big gatherings. He asserted that this will dent fuel consumption and almost certainly force OPEC and its allies to continue withholding oil supply well into 2021.