Oil Holds Near 4-Week Low After Virus Plunge



Oil Holds Near 4-Week Low After Virus Plunge
Oil held near a four-week low after a surge in European virus cases and a bigger-than-expected jump in American crude stockpiles pushed prices down by the most in almost two months in the previous session.

(Bloomberg) -- Oil held near a four-week low after a surge in European virus cases and a bigger-than-expected jump in American crude stockpiles pushed prices down by the most in almost two months in the previous session.

Futures in New York were steady near $37 a barrel after plunging 5.5% Wednesday. Germany and France, the European Union’s two biggest economies, will clamp down on movement for at least a month to try and curb Covid-19’s spread. The benchmark S&P 500 Index fell the most since June on fears the resurgent virus will throw the global recovery into reverse.

American crude inventories rose by 4.32 million barrels last week, the most since July and almost three times more than forecast, Energy Information Administration data show. Still, distillates stockpiles fell more than expected.

Oil is on track for its worst month since April as the pandemic’s resurgence in Europe and the U.S. coincides with an increase in supply from Libya. The head of Saudi Aramco’s trading unit warned there may not be enough demand to absorb the planned OPEC+ supply increase in January and traders are cautious of taking long positions on crude due to the uncertain outlook.

“The data that have been coming out looking awfully weak and it’s barely a surprise to see inventories turning higher in the wake of the softening economic backdrop,” said Howie Lee an economist at Oversea-Chinese Banking Corp. in Singapore. “I expect OPEC+ will delay the supply increase by three months to April 2021.”

Prices

  • West Texas Intermediate for December delivery added 0.1% to $37.42 a barrel on the New York Mercantile Exchange at 7:16 a.m. in London.
    • It closed at the weakest since Oct. 2 on Wednesday and is down around 7% so far in October.
  • Brent for December settlement was steady at $39.11 on the ICE Futures Europe exchange after losing 5.1% on Wednesday.
  • Crude futures on the Shanghai International Energy Exchange fell 5.7% to 237.7 yuan a barrel after losing 1.7% on Wednesday.

The growing nervousness is being reflected in oil’s market structure. Brent’s three-month timespread was $1.26 a barrel in contango -- where prompt prices are cheaper than later-dated ones -- compared with 86 cents at the end of last week. The change suggests fears of a glut are rising.

OPEC+ started to taper its production cuts from August, and there are growing signs the group may delay the planned next phase of the easing in January. If the refiners are cutting throughput, that’s a good indication the market isn’t there, said Ibrahim Al-Buainain, chief executive officer of Aramco Trading.

Tropical Storm Zeta, meanwhile, is spinning across central Alabama after being downgraded from a hurricane. Two-thirds of oil production in the Gulf of Mexico has been shut down, although that’s failed to ignite a meaningful recovery in prices so far.

Other oil-market news

  • Exxon Mobil Corp. is maintaining the third-highest dividend in the S&P 500 Index, underscoring its historic commitment to the payout despite this year’s virus-driven oil crash.
  • North Sea Johan Sverdrup crude loadings have been set at 22 cargoes totaling 15 million barrels, or 484,000 barrels a day, in December, according to a program seen by Bloomberg. The daily volume is highest since the field started production in October 2019.

© 2020 Bloomberg L.P.



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