Oil prices slipped by nearly 3% on Wednesday, wiping out most of the previous session’s gains as a build in the U.S crude stocks and rising coronavirus infections in the U.S. and Europe stoked fears of a supply glut and lower fuel demand.
Brent crude futures were down $1.02 or 2.48%, at $40.18 a barrel by 09:12 West Africa Time, having climbed nearly 2% the previous day. U.S. West Texas Intermediate was down $1.19 or 3.01%, at $38.38, after gaining 2.6% on Tuesday.
United States crude oil and gasoline stocks advanced last week, figures from industry group the American Petroleum Institute revealed, with crude inventories lifting by 4.6 million barrels to around 495.2 million barrels, well beyond analysts’ expectations in a Reuters poll for a rise of 1.2 million barrels.
“The higher-than-expected build in U.S. crude stocks prompted fresh selling, while concerns over supply disruption from Hurricane Zeta have receded,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Oil and gas companies as well as ports along the U.S. Gulf Coast braced for Zeta, the 11th Hurricane of the season, on Tuesday as it swept into the Gulf of Mexico.
“Rising COVID-19 cases with the lack of a U.S. coronavirus fiscal relief package also dented investors’ risk appetite,” Kikukawa said. He anticipated the bleak sentiment to strain prices through the 3rd November U.S. presidential election.
The U.S., France, Russia and other countries have registered record numbers of cases in recent days, and European governments have introduced fresh restrictions to limit the fast-rising outbreaks.
President Donald Trump admitted on Tuesday a coronavirus stimulus package would likely come after the election, with the White House unable to patch up differences with fellow Republicans in the U.S. Senate alongside congressional Democrats.
“With and without another lockdown, movement across Europe and North America will fall during the coming winter months as most people avoid travel and big gatherings,” said Henning Gloystein, director of global energy & natural resources at Eurasia Group, in a note on Wednesday.
“This will dent fuel consumption and almost certainly force OPEC and its allies to continue withholding oil supply well into 2021,” he said.
The Organisation of the Petroleum Exporting Countries (OPEC) and its Russia-led allies, a cartel known as OPEC+, plans to pare down size of its output cuts in January from a current 7.7 million barrels per day (bpd) to approximately 5.7 million bpd. While still a substantial amount, it may not be sufficient to offset weak demand.
Libyan production is seen rising to 1 million bpd in the weeks ahead, adding to pressure.
China remains the only bright spot on the global oil market. Its local aviation fuel consumption rebounded close to almost pre-COVID levels last month, thanks to a swift recovery in passenger travel and cargo freight, industry sources said.
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