MELBOURNE: Oil prices dropped on Wednesday, paring overnight gains, with soaring COVID-19 cases in India and a bigger-than-expected build in U.S. crude stocks offsetting confidence shown by OPEC and its allies in a solid recovery in global fuel demand.
Brent crude futures fell 26 cents, or 0.4%, to $66.16 a barrel at 0205 GMT, paring a 1.2% gain from Tuesday.
U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4%, to $62.71 a barrel, after gaining 1.7% on Tuesday.
The American Petroleum Institute industry group reported crude stocks rose by 4.319 million barrels, according to two sources, which was a much bigger build than analysts in a Reuters poll had estimated.
The more closely watched weekly inventory data from the U.S. Energy Information Administration (EIA) is due at 1430 GMT on Wednesday.
U.S. crude had opened higher on Wednesday, after a market monitoring panel of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, stuck with plans to bring 2.21 million barrels per day (bpd) back to the market in three stages between May and July.
The volume includes 1 million bpd which Saudi Arabia voluntarily cut.
“It’s almost as if they looked at the situation in India and some concerns in Brazil and said these are risks but right now the demand story still has a way to go,” said Commonwealth Bank commodities analyst Vivek Dhar.
The rapid spread of COVID-19 infections in India has stalled oil price gains with fuel use and refinery output dropping in the country, the world’s third largest oil consumer. However the market is banking on a strong recovery in the United States and China to outweigh that impact.
“India is certainly a risk, but I don’t think it’s going to derail the story we have right now on this rate of recovery,” Dhar said.