Oil slips as US inventory build stokes fears of supply glut

Spike in global Covid-19 cases fuels fears of stalled oil demand recovery

LONDON:

Oil prices eased on Wednesday after a surprise build-up in US crude stockpiles stoked concerns about a global supply glut and a spike in global Covid-19 cases fuelled fears of a stalled oil demand recovery.

Brent crude futures LCOc1 for December delivery were at $42.44 a barrel, down $0.72, or 1.67%, as of 1209 GMT, while December US West Texas Intermediate (WTI) crude futures CLc1 slipped $0.73, or 1.75%, to $40.97. Both benchmarks rose in the previous session.

“Lower European equity markets and a surprise crude build are in my view the factors weighing on oil prices. The market is probably also wanting to see if the EIA confirms the API report later today (Wednesday) and any news on a fiscal package in the US,” Giovanni Staunovo, analyst at UBS Bank, said.

Crude inventories rose by 584,000 barrels in the week to October 16 to 490.6 million barrels, data from industry group the American Petroleum Institute (API) showed, compared with analysts’ expectations in a Reuters’ poll for a draw of 1 million barrels.

Data from the US Energy Information Administration (EIA) is due out later on Wednesday.

Adding to pressure, worldwide Covid-19 cases crossed 40 million on Tuesday, with some parts of Europe imposing renewed lockdown measures.

On the supply side, Russia’s energy minister said on Tuesday it was too early to discuss the future of global oil production curbs beyond December, less than a week after saying plans to scale back existing output restrictions should proceed.

Earlier this year, the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia – together known as OPEC+ - agreed to trim production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd.

At the same time, OPEC member Libya, which is exempt from the cuts, is also ramping up production after armed conflict shut almost all of the country’s output in January, pumping more oil into an oversupplied market.

The battle over a hefty, new US coronavirus aid bill was set to spill into Wednesday as the White House and Democrats try to strike a deal before the November 3 presidential and congressional elections, now with the encouragement of President Donald Trump.