Oil Little Changed, Huge Draw Eclipsed by Growing Demand Fears

By Bryan Wong

Investing.com- Oil was little changed on Thursday morning in Asia, with prices rising after the U.S. Energy Information Administration (EIA) recorded a huge draw in crude oil inventories. But gains were capped by the U.S. Congress’ squabble over the latest COVID-19 stimulus package as well as rising infections globally.

Brent oil futures were trading at $44.12 by 12:02 AM ET (5:02 AM GMT) while WTI futures were last at $41.25.

The EIA recorded a 10.612 million-barrel draw in inventories for the week ending July 24, its biggest since 2019. The draw was substantially higher than forecasts for a 0.357 million-barrel build prepared by Investing.com.

But ANZ analysts warned in a note that the draw “wasn’t all good news, with signs that demand is still struggling to grow.” Demand is likely to be hampered as fresh outbreaks cause some countries to re-impose lockdown measures.

There are almost 17 million COVID-19 cases globally as of July 30, according to Johns Hopkins University data. The Australian city of Melbourne reported a record number of daily cases on Thursday.

“As long as we’re recording new daily cases, the risk for oil demand is just too strong,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, told Reuters.

“If we see lockdowns or partial lockdowns, transportation gets hit disproportionately. Transportation accounts for two-thirds of oil demand,” he added.

Meanwhile, investors will be watching out for OPEC’s next move as production cuts of 9.7 million barrels per day agreed upon in April, which were extended in June, are set to ease to a cut of 7.7 million barrels per day from August to December. Weakened demand could also see Saudi Arabia reduce the price of its oil once the cuts are eased.

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