Oil prices fell on Wednesday as the spread of the coronavirus Delta variant in top consuming countries outweighed Mideast geopolitical tensions and a fall in US inventories.
Brent crude oil futures were down $0.67, or 0.9%, to $71.74 a barrel by 1144 GMT. US West Texas Intermediate (WTI) crude fell $0.86, or 1.2%, to $69.70 a barrel.
“Worries continue to grow over the spread of the Delta variant in China, which has weighed heavily on oil prices in recent days,” analysts at bank ING said.
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 fear will limit fuel demand at a time when it traditionally rises in both countries.
In China, the spread of the variant from the coast to inland cities has prompted authorities to impose strict measures to bring the outbreak under control.
An expected fall in US inventories, however, capped some losses, and both contracts traded slightly higher earlier in the session.
“[Oil] bulls have drawn support from US inventory dynamics, with commercial stocks falling to their lowest since January 2020 and indications that the tightening is set to continue,” oil brokerage PVM said.
US crude inventories fell by 879,000 barrels for the week ended July 30, according to two market sources, citing figures from industry group American Petroleum Institute (API).
Gasoline inventories fell by 5.8 million barrels and distillate stocks fell by 717,000 barrels, the data showed, according to the sources, who spoke on condition of anonymity.
Official Energy Information Administration numbers are due later on Wednesday.
Tensions in the Mideast Gulf also lent prices some support.
On Tuesday, three maritime security sources clamed Iranian-backed forces seized an oil product tanker off the coast of the United Arab Emirates, though Iran denied the reports.
This is the second attack on a tanker since Friday in the region, which includes the Strait of Hormuz. The UK and the US are also blaming Iran for the earlier incident, in which drones crashed into the vessel and killed two sailors.