Oil dropped after an industry report pointed to a surprise increase in American crude stockpiles, countering optimism over a potential US stimulus agreement.
The American Petroleum Institute (API) reported crude inventories climbed by almost 600,000 barrels last week, according to people familiar with the data. That contrasts with a stockpile decline forecast in a Bloomberg survey. Brent crude futures were 1.3% lower, reversing the previous session’s gains that were driven by hopes of the economic stimulus.
A resurgent coronavirus and expanding Libyan supply are keeping oil in check. While China is supporting demand, there are signs of weakening consumption in western Europe and Opec+ has warned of a precarious market outlook. The coalition of producers will have to decide next month if it will stick with plans to raise production in January, or heed industry warnings about an
imminent glut if it does so.
Brent “remains stuck in the low $40s with the weaker dollar and the potential for a stimulus having no positive impact,” said Ole Hansen, head of commodities strategy at Saxo Bank. The market is focusing on inventories, and “overall it makes sense that crude is struggling while the demand outlook remains murky.”
Crude stockpiles at the American storage hub of Cushing increased by 1.17 million barrels last week, the API reported. That would be a fifth straight gain if confirmed by government data. Gasoline and distillate supplies declined, according to the API.