Oil prices fall on US crude stock build, Covid-19 Delta variant spread

 Traders noted the oil price drop came despite reports of increased Mideast geopolitical tensions

By Scott DiSavino

Oil prices fell for the third day in a row to a two-week low on Wednesday on a surprise build in U.S. crude stockpiles, negative U.S. economic report, and worry the spread of the coronavirus Delta variant will weigh on global energy demand.

Traders noted the oil price drop came despite reports of increased Mideast geopolitical tensions.

Brent futures fell $2.03, or 2.8%, to settle at $70.38 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $2.41, or 3.4%, to settle at $68.15.

That was the lowest close for both benchmarks since July 20.

The U.S. Energy Information Administration (EIA) said crude stockpiles rose by an unexpected 3.6 million barrels last week, while gasoline inventories fell by a bigger-than-forecast 5.3 million barrels. [EIA/S]

"Crude prices remained heavy after the EIA crude oil inventory showed stockpiles unexpectedly rose last week," said Edward Moya, senior market analyst at OANDA, noting "the report was mixed as gasoline stockpiles fell more than expected."

With U.S. gasoline futures near their highest since October 2014, the gasoline crack spread - a measure of refining profit margins - closed at its highest since hitting a record in April 2020 when WTI settled in negative territory.

Coronavirus cases worldwide surpassed 200 million on Wednesday, according to a Reuters tally, as the more infectious Delta variant threatens areas with low vaccination rates and strains healthcare systems.

The United States and China, the world's two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious Delta variant that analysts anticipate will limit fuel demand at a time when it traditionally rises in both countries.