Oil Down After Report Points to Rising Stockpiles



Oil Down After Report Points to Rising Stockpiles
Oil retreated back below $39 a barrel after an industry report pointed to a bigger-than-expected increase in U.S. crude stockpiles.

(Bloomberg) -- Oil retreated back below $39 a barrel after an industry report pointed to a bigger-than-expected increase in U.S. crude stockpiles, offsetting supply disruptions from Hurricane Zeta.

The American Petroleum Institute reported crude inventories expanded by 4.58 million barrels last week, while gasoline stockpiles rose for a second straight week, according to people familiar with the data. Official government figures are due Wednesday. A stronger U.S. dollar is also having an impact, making commodities priced in the currency less appealing to investors.

Oil rallied on Tuesday after almost half of U.S. Gulf output was shuttered ahead of Zeta, which is expected to make landfall in Louisiana late Wednesday.

Oil is testing the lower end of its recent trading range as coronavirus cases climb across Europe and the U.S., raising concerns the fragile demand recovery may be derailed. The market is also facing rising supply from Libya, presenting OPEC+ with some tough decisions on the future of its output cuts when the producer group meets at the end of next month.

“The U.S. Gulf closures are seen as fleeting, whereas sizable stock-builds in the U.S. serve to amplify the market’s bearish sentiment on demand,” said Vandana Hari, founder of Vanda Insights in Singapore. “The path of least resistance for crude prices is downward.”

Prices

  • West Texas Intermediate for December delivery dropped 3% to $38.37 a barrel on the New York Mercantile Exchange as of 7:55 a.m. London time after climbing 2.6% on Tuesday
  • Brent for December settlement lost 2.5% to $40.16 on the ICE Futures Europe exchange after rising 1.8% in the previous session
  • Crude futures on the Shanghai International Energy Exchange fell 1.7% to 252 yuan a barrel after adding 0.2% on Tuesday

Brent’s three-month timespread was $1.13 a barrel in contango -- where prompt prices are cheaper than later-dated ones -- compared with 99 cents a week earlier, signaling concerns about over-supply are persisting.

U.S. gasoline inventories expanded by 2.25 million barrels last week, while crude supplies at the key storage hub of Cushing climbed by 136,000 barrels, according to the API. The median estimate in a Bloomberg survey forecast nationwide crude stockpiles increased by 1.5 million barrels

Meanwhile, Libya is ramping up production quickly after reopening the last of its oil fields and ports following a truce in a years-long civil war. Daily crude output has surged from less than 100,000 barrels in early September to almost 700,000 as of Monday, and may rise to more than 1 million barrels a day by mid- to late-November.

Other oil-market news:

  • BP Plc used a surprise third-quarter profit to reassure investors that it was on the road to recovery, while also warning that it would be a long journey.
  • Traffic congestion has crept higher in North and South American cities this month, held steady in China and fallen back in several European capitals as different parts of the world respond to the coronavirus pandemic.

© 2020 Bloomberg L.P.



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