Oil prices dropped by almost 3 percent on Thursday morning and were set for the biggest percentage drop since early April, after the restart of Colonial Pipeline eased some of the concerns about gasoline shortages in the U.S. East.
As of 11:01 a.m. EDT on Thursday, WTI Crude was falling by 2.94 percent at $64.14 and Brent Crude was down by 2.64 percent at $67.49.
Oil prices snapped the winning streak from earlier this week when reports from both OPEC and the International Energy Agency (IEA) reiterated the view that global oil demand would rebound strongly in the second half of the year with more economies reopening and increased travel amid higher vaccination rates.
The excess oil inventories of the past year have been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws, the IEA said on Wednesday. The agency’s bullish outlook on demand, coupled with a similar view from OPEC from Tuesday, sent oil prices to an eight-week high on Wednesday.
But on Thursday, the market focused again on the COVID crisis in India and the coronavirus strain there.
In addition, Colonial Pipeline resumed operations late on Wednesday, the operator of America’s main fuel pipeline said. Colonial warned that a full return to normal deliveries after a ransomware attack forced a total shutdown on Friday would take a few more days, Yet, the gradual restart eased some of the concerns that the U.S. East Coast would suffer from fuel shortages beyond this weekend.
On Thursday, the U.S. dollar also played a part in falling oil prices as the greenback strengthened, making crude buying more expensive for holders of other currencies.
Concerns about inflation added to the bearish note on the markets early on Thursday.
“Crude futures were sliding early Thursday in Asia as the broader financial markets languished in a risk-off mode after the US on Wednesday reported strong consumer inflation for April,” Vanda Insights said in daily note.
