Oil prices fell more than 7% on Thursday, registering their biggest one-day drop since September, with traders pondering signs that demand in Europe could falter and data showing that oil remains plentiful.
US oil prices ended the day with a 7.1% drop, to $ 60 a barrel, after its fifth consecutive daily drop. The drop interrupts what had been an almost uninterrupted increase since the beginning of the year. Even with Thursday’s drop, oil is still up almost 25% in 2021. It hit a nearly two-year high, up from $ 66 earlier this month.
Energy markets have reversed their course this week, with investors worried that an uneven distribution of coronavirus vaccines in Europe and rising cases in parts of the world could warn caution among consumers and weaken fuel demand. Although the European Union health agency said on Thursday that a vaccine produced by AstraZeneca PLC was safe, many analysts still expect the recovery in fuel demand to be uneven.
France on Thursday announced a new blockade in the Paris region. Germany and France suspended the use of the AstraZeneca vaccine earlier in the week, aggravating existing concerns that the region’s economy could lag further behind the rest of the world.
Some traders are also concerned that demand in Asia, which has been stable recently, may disappoint due to border closures and other restrictions.
And while massive cuts in oil supplies by major producers like Saudi Arabia have boosted prices, Thursday’s fall highlighted a growing recognition that demand will not be strong enough to take them much higher than theirs. current range, traders said. Some investors in the past few weeks have been considering the possibility of a commodity “super cycle” that could drive fuel prices up a lot and hurt consumers.
“The rhetoric of the ‘super’ oil price cycle is finally undergoing a reality check,” said Louise Dickson, an oil market analyst at consultancy Rystad Energy, in a statement.
Brent oil, the global indicator of oil prices, ended the day with a 6.9% drop to $ 63.28 a barrel, also reducing part of its recent advance.
In another sign, oil remains plentiful, U.S. oil inventories have increased during the week ending March 12 and are about 6% above their average five-year levels for this time of year, said the Information Administration of Energy on Wednesday. Energy markets are still recovering after the recent Texas freeze, which has reduced the amount of oil consumed by refineries. Refineries absorb oil and transform it into other energy products.
And the International Energy Agency said in its latest monthly report this week that global oil and supply stocks remain plentiful, alleviating some concerns about possible shortages and a prolonged rise in fuel prices that hit consumers at the pump.
Despite the recent drop in oil prices, many analysts expect the production cuts to continue by the Organization of Petroleum Exporting Countries and their allies to keep oil at its current levels.
Write to Amrith Ramkumar at [email protected]
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Published in the March 19, 2021 print edition as ‘Crude Drops 7% on Worry Over Vaccine Woes.’