Oil falls as US crude inventories rise and Libya increases supply

London — Oil edged lower on Wednesday trading below $42 a barrel, pressured by a report that US crude inventories unexpectedly rose and as growing numbers of coronavirus cases around the world raised concern of stalling demand.

The American Petroleum Institute 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 2.30pm 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 fell 1c to $41.71 a barrel by 8.18am GMT, paring an earlier 1.2% drop. US West Texas Intermediate crude 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-19 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 on to the market from Libya. In the US, 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 oil cartel Opec and its allies, which includes Russia (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.

Reuters