Oil weakens after unexpected U.S. crude inventory rise
Oil edged lower on Wednesday trading below $42 a barrel, pressured by a report that U.S. crude inventories unexpectedly rose and as growing numbers of coronavirus cases around the world raised concern of stalling demand.
The American Petroleum Institute, an industry group, said crude inventories rose by 691,000 barrels rather than falling as analysts forecast. Official inventory numbers from the Energy Information Administration are due at 1430 GMT.
“Sentiment remains fragile,” said Jeffrey Halley, analyst at broker OANDA. “Inventories are expected to fall by 2.3 million barrels. A surprise increase could well be enough to initiate another downward leg in crude prices.”
Brent crude LCOc1 fell 1 cent to $41.71 a barrel by 0818 GMT, paring an earlier 1.2% drop. U.S. West Texas Intermediate crude CLc1 was unchanged at $39.80. Both contracts fell more than 4% on Monday, though they rose on Tuesday.
“Yesterday’s positive tone is pausing for breath,” said Stephen Brennock of broker PVM. “The outlook has taken a big knock of late amid the intensifying COVID pandemic.”
Surging infections in countries including India, France and Spain and new restrictions in Britain have renewed worries about demand, just as more supply may come onto the market from Libya. In the United States, the death toll from COVID-19 has passed 200,000, the world’s highest.
Oil collapsed this year as the pandemic decimated demand, with Brent falling to below $16, a 21-year low, in April. A record output cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, has helped revive prices.
OPEC faces a new challenge in that Libya, an OPEC member exempt from the supply cut, is aiming to boost supply after an easing of the country’s conflict.
Source: Reuters (Additional reporting by Aaron Sheldrick; editing by Kirsten Donovan)