Oil prices tumbled on Wednesday after a sudden build-up in U.S. crude stocks, raising concerns about a global glut even as a spike in global COVID-19 cases fuelled fears of slower recovery in fuel demand. Brent crude futures for December delivery were at $ 42.93 a barrel, or 23 cents, or 0.5%, at 0332 GMT, while US West Texas Intermediate crude futures for December were down 20 cents or 0.5% at $ 41.50 a barrel. Both benchmarks were up in the previous session.
” A U.S. inventory build, together with the recent resurgence of COVID-19 cases around the world, has prompted investors to make position adjustments,” said Chiyoki Chen, a senior analyst at commodity broker Sunward Trading.
Data from the American Petroleum Institute showed crude inventories rose 584,000 barrels in the week ending October 16 to about 490.6 million barrels, compared with analysts’ expectations in a Reuters poll for a draw of 1 million barrels. Adding to the pressure, COVID-19 cases crossed 40 million on Tuesday, with some parts of Europe imposing renewed lockdown measures.
On the supply front, Russia’s energy minister said Tuesday that it was too early to discuss future restrictions on global oil production after December, less than a week after he said plans to cut current restrictions on production should continue.
Earlier this year, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC +, agreed to cut production cuts in January from the current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd.
Meanwhile, OPEC member Libya, exempt from cuts, is also ramping up production after the armed conflict shut down almost all of the country’s production in January, sending more oil to the oversupplied market.
Meanwhile, some support for prices has come from the White House and Democrats in the US Congress. They are close to agreeing to a new coronavirus relief package that could boost demand for fuel, as President Donald Trump You have said you are ready to accept a large aid bill.
Satoru Yoshida, the commodity analyst, said: “Hopes for economic stimulus in the United States and other countries to combat the pandemic-led slump in consumption recession are expected to curb losses, but planned reduction in output cuts by OPEC+ will also limit any future gains,” said Satoru Yoshida, a commodity analyst with Rakuten Securities, predicting an upside and downside potential of $5 a barrel through the year.