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Oil prices slipped by 2 percent early on Wednesday, dragged down by surging coronavirus cases across major energy importers India and Japan.
On Tuesday, oil prices slumped after the American Petroleum Institute (API) estimated a build in crude oil inventories of 436,000 barrels for the week ending April 16. Analysts had predicted a draw of 2.860 million barrels for the week.
Oil continued to fall on Wednesday as the estimated build in crude oil stocks combined with the COVID wave in major Asian economies such as India and Japan and with a stronger U.S. dollar to push prices further down in the morning.
India has been reporting record daily new cases in recent days, and on Monday, the capital New Delhi announced a six-day lockdown as hospitals are overwhelmed with patients with severe COVID symptoms. Earlier this month, the biggest city and financial center, Mumbai, was also placed on lockdown until the end of this month, threatening the recovery of fuel demand in the country.
Related: The World Still Needs Hundreds Of Billions Of Barrels Of Oil
India’s demand for all major fuels—diesel, gasoline, jet fuel, and liquefied petroleum gas (LPG)—dropped in the first half of April compared to the same period in March, officials told PTI this week.
In Japan, the government is studying a state of emergency for the cities of Tokyo and Osaka amid soaring daily new coronavirus cases. This comes just three months before the planned start of the Tokyo Summer Olympics.
“The risk of another coronavirus flare-up in Asia once again hurting demand forecasts, thereby putting into doubt the ability of OPEC+ to proceed with their announced production increase,” Saxo Bank said on Wednesday.
“Prices are back on the defensive following last week’s breakout with focus on the 21-day moving averages at $64.25 in Brent and $60.80 in WTI,” Saxo Bank’s strategy team noted.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.