Build in US crude supplies clouds outlook for oil

Oil was up Thursday morning in Asia but remained a three-week low even if the US increased its fuel supplies. However, investors remain concerned about the spike of Covid-19 cases in parts of Asia.

Brent oil futures were up 0.30% to $66.86 by 13:09 AM ET (5:09 AM GMT) and WTI futures gained 0.40% to $63.61.

US crude oil supply data from the US Energy Information Administration, released on Wednesday, showed a build of 1.321 million barrels for the week ending May 14. Forecasts prepared by Investing.com had predicted a 1.623-million-barrel build, while a 427,000-barrel draw was reported during the previous week.

Crude oil supply data from the American Petroleum Institute released the day before showed a better-than-expected build of 620,000 barrels.

Meanwhile, the US and Iran are close to reviving a 2015 nuclear deal that could lift sanctions and give a boost in Iranian crude supply.

Enrique Mora, the European Union official in charge of coordinating diplomacy in Vienna for the nuclear talks, said he expects all parties to return to the agreement ahead of Iran’s presidential elections on June 18. Iran will also soon export its increasing crude output from the Jask terminal on the Gulf of Oman coast from June onwards, allowing them to bypass the Strait of Hormuz.

On the demand front, although oil is up about 30% this year due to the continuous economic recovery from Covid-19 in the US, China and parts of Europe, a resurgence of Covid-19 cases in parts of Asia remains to overshadow the market. In India, the number of Covid-19 cases topped 25 million as of May 20, according to Johns Hopkins University data, with almost 66% of people tested in the country showing exposure to Covid-19.

“A resurgence in Covid-19 cases across parts of Asia is doing little to support the market in the near term,” ING Economics said in a note.

First published on Investing.com