Oil prices drop due to fears of inflation, and rising infections in Asia
Oil prices fell for the second day Wednesday amid renewed demand concerns amid rising coronavirus cases in Asia and fears of rising inflation.
Brent crude oil futures fell 73 cents, or 1.1%, to $ 67.98 a barrel at 0452 GMT. It was down 1.1% on Tuesday, after breaking above $ 70 for a short time in the early hours of the session.
West Texas Intermediate (WTI) crude oil futures fell 77 cents, or 1.2%, to $ 64.72 a barrel, after a 1.2% drop on Tuesday.
The optimism about the reopening of the US and European economies, which are among the largest oil consumers in the world, brings Brent to $ 70. However, the increase of COVID-19 cases and restrictions in India, Taiwan, Vietnam and Thailand and the fear of slowing fuel demand in Asia drops it down.
Some investors feel that $ 70 indicates an irrational enthusiasm. The worldwide reopening and restrictions are at their most varied mood since the beginning of the pandemic, and speculating on the direction of global demand remains challenging.
Uncertainties regarding inflation keep investors away from investing in more risky assets like oil. It is important to take the right position in the ongoing broad risk-averse game.
Speculation that the Fed may raise interest rates due to fear of inflation is weighing on the growth outlook and thus commodity demand.
Investors will also watch the latest US crude oil and product stocks data from the US Energy Information Administration on Wednesday.
Data released Tuesday from the American Petroleum Institute showed that crude oil stocks increased by 620,000 barrels during the week of May 14. Gasoline stocks fell 2.8 million barrels and distillate stocks fell 2.6 million barrels, according to two market sources.
The increase in crude oil stocks was lower than the 1.6 million barrel increase analysts had predicted, while the declines in gasoline and distillate stocks were larger than expected.
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