Oil slides as US crude drawdown faces Covid-19 surge, firmer dollar

By David Gaffen

NEW YORK (Reuters) -Oil prices dipped slightly on Wednesday after four straight days of declines, as investors remain worried about the outlook for fuel demand as COVID-19 cases surge worldwide and on rising strength in the U.S. dollar.

Brent crude was down 25 cents to $68.77 a barrel by 11:47 a.m. EDT (1547 GMT). U.S. WTI crude oil lost 41 cents to $66.17 a barrel.

The U.S. dollar index was up 0.1%, hitting its highest level since April. Crude prices often move inversely to the dollar because the commodity is priced in dollars; when the U.S. currency rallies, it makes oil more expensive for foreign buyers.

The market was helped by a bigger-than-expected drawdown in U.S. crude inventories, which fell 3.2 million barrels last week to 435.5 million barrels, their lowest since January 2020 and more than anticipated. Gasoline stocks, however, rose modestly, which kept the market from moving up given ongoing worries about coronavirus. [EIA/S]

Oil markets have, however, experienced several days of weakness due to the rise in infections caused by the Delta variant of the coronavirus both in the United States and worldwide. Several countries have re-introduced travel restrictions and air traffic has softened in recent weeks.

The four-week average of overall U.S. product supplied to the market - a measure of demand - was 20.8 million barrels per day, in line with pre-coronavirus levels from 2019. Gasoline product supplied was 9.5 million bpd, just 1% below 2019 levels. U.S. fuel demand has steadily increased throughout the year as consumers have resumed activities with vaccination rates going up.

"Gasoline demand was very strong, we are deep in the season to see these kinds of numbers. The crude draw will be very supportive for the market," said John Kilduff, partner at Again Capital LLC in New York.

(Reporting by David Gaffen in New York; additional reporting by Laura Sanicolain New York, Aaron Sheldrick in Tokyo and Dmitry Zhdannikov in London; Editing by Marguerita Choy)