Oil falls for second day as US stockpiles rise again

London — Oil prices fell for a second day and were on track for a second weekly fall after US stock markets tumbled and US stockpiles rose unexpectedly.

Brent was down 12c, or 0.3%, at $39.94 a barrel by 8.41am GMT, after falling nearly 2% on Thursday, while US crude dropped 3c, or 0.1%, to $37.27 a barrel, having fallen 2% in the previous session.

Both benchmarks were 6% down for the week.

“Financial markets are continuing to set the tone, including on the oil market. The renewed slide on US stock markets dragged oil prices down with it,” Commerzbank analyst Eugen Weinberg said.

Heavyweight tech-related stocks resumed their decline on Thursday as the number of Americans filing new claims for unemployment benefits remained high.

“Stock markets dived, oil followed, and Brent lost 15% of its value in five trading sessions as money managers liquidated,” oil broker PVM’s Tamas Varga said.

Also dampening the market mood, the US Senate killed a Republican bill that would have provided about $300bn in new coronavirus aid.

Fears about an oversupply also added to the general feeling of uncertainty, Weinberg said.

In the US, stockpiles rose last week, against expectations, as refineries slowly returned to operations after production sites were shut down due to storms in the Gulf of Mexico and the wider region.

US crude inventories rose 2-million barrels, compared with forecasts for a 1.3-million barrel decrease in a Reuters poll.

In a further bearish sign, traders were starting to book tankers again to store crude oil and diesel, amid a stalled economic recovery as the Covid-19 pandemic continues.

Increasing stockpiles are likely to be a subject at a meeting on September 17 of the market monitoring panel of oil cartel Opec and allies, including Russia (Opec+).

Opec+ has been withholding supply to reduce stockpiles, but analysts say the meeting is likely to focus on compliance among members, rather than seek deeper cuts.

Following Saudi Arabia, Kuwait also lowered its official selling price to Asia for October, to counter slower demand.

Reuters