Oil falls 2% as rise in U.S. crude stocks fans oversupply fears

Oil prices slid about 2 percent on Wednesday, giving up most of the previous day’s gains, as a surge in U.S. crude stocks and growing coronavirus infections in the United States and Europe fanned fears of a supply glut and weaker fuel demand.

Brent crude futures were down 74 cents, or 1.8%, at $40.46 a barrel by 0644 GMT, having climbed nearly 2% the previous day. U.S. oil was down 90 cents, or 2.3%, at $38.67, after gaining 2.6% on Tuesday.

U.S. crude oil and gasoline stocks rose last week, data from industry group the American Petroleum Institute showed, with crude inventories rising by 4.6 million barrels to about 495.2 million barrels, well above analysts’ expectations in a Reuters poll for a build of 1.2 million barrels.

Energy firms and ports along the U.S. Gulf Coast prepared on Tuesday for Zeta, the 11th hurricane of the season, as it entered the Gulf of Mexico.

The United States, Russia, France and other countries have registered record numbers of infections in recent days, and European governments have introduced new curbs to try to rein in the fast-growing outbreaks.

President Donald Trump acknowledged on Tuesday that a coronavirus economic relief package would likely come after the election, with the White House unable to bridge differences with fellow Republicans in the U.S. Senate as well as congressional Democrats.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, plans to scale back the size of its production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd. While still an enormous amount, this may not be enough to offset weak demand.

Adding to pressure, Libya’s production should rebound to 1 million bpd in coming weeks. China is the only major bright spot on the world oil market. Its domestic aviation fuel consumption rebounded to near pre-COVID levels in September, thanks to a fast recovery in passenger travel and cargo freight, industry sources said.

Oil falls 2% as rise in U.S. crude stocks fans oversupply fears, Reuters, Oct 28