Oil loses Tuesday’s gains as fears of a supply glut persist

London — Oil prices went into reverse on Wednesday, giving up the previous day’s gains as a surge in US crude stocks and rising coronavirus infections in the US and Europe fanned fears of a supply glut and weaker fuel demand.

Brent crude futures were down $1.20, or 2.9%, at $40 a barrel by 9.20am GMT, having climbed nearly 2% on Tuesday. US crude was down $1.49, or 3.7%, at $38.08 after a 2.6% jump the previous day.

US crude oil and petrol stocks rose last week, data from the American Petroleum Institute (API) showed, with crude inventories rising by 4.6-million barrels to about 495.2-million barrels, well above analysts’ expectations of a 1.2-million barrel build in a Reuters poll of analysts.

“With hefty stock builds across the board in the headline API numbers, it is not all that surprising the oil price is moving lower this morning while waiting for the official EIA numbers this afternoon,” said BNP Paribas analyst Harry Tchilinguirian said.

Energy companies and ports along the US Gulf Coast prepared on Tuesday for Hurricane Zeta as it entered the Gulf of Mexico.

Meanwhile, the US, Russia, France and other countries have registered record numbers of Covid-19 cases in recent days and European governments have introduced new curbs to try to rein in the fast-growing outbreaks.

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

Adding to pressure on oil markets, Libya’s production is expected to rebound to one-million bpd in the coming weeks.

More bullish for oil prices was news that China’s domestic aviation fuel consumption rebounded close to pre-pandemic levels in September, buoyed by a fast recovery in passenger travel and cargo freight, industry sources said.

Reuters