Oil prices fall on US stock build and likely fall in demand

London — Oil prices fell on Wednesday as industry data showed a bigger than expected inventory build in the US, where a surge in coronavirus cases could further dent fuel demand in the world’s biggest oil consumer.

Brent crude fell 39c, or 0.9%, to $43.93 a barrel by 8.37am GMT. US West Texas Intermediate (WTI) crude dropped 48c, or 1.1%, to $41.44.

The American Petroleum Institute (API) reported US crude inventories rose last week by 7.5-million barrels, against expectations for a draw of 2.1-million barrels. The US Energy Information Administration (EIA) releases official oil data later on Wednesday.

“US glut fears have become a permanent fixture of the oil market,” said Stephen Brennock of oil broker PVM. “This will remain the case as long as the US oil demand outlook is being undermined by the country’s failure to contain the Covid-19 pandemic.”

Global coronavirus infections surged past 15-million on Wednesday, with the pandemic gathering pace even as countries remain divided in their response to the crisis.

In his first pandemic press briefing in months, US President Donald Trump said the outbreak would probably get worse before it gets better. His comments were a shift in strategy from his previously robust emphasis on reopening the US economy.

Republicans and Democrats are also struggling to come to terms over more fiscal support for the economy, contrasting with the EU deal that lifted oil prices on Tuesday.

Rising tension between the US and China over the coronavirus and Hong Kong also pressured prices. China said the US had abruptly told it to close its consulate in Houston — a move that Beijing said it strongly condemns, threatening retaliation.

Economic data from Japan, the world’s fourth-largest oil consumer, also weighed on prices. Factory activity contracted for a 15th straight month in July, indicating lower economic activity as the pandemic extends into the third quarter.

There are also signs that Iraq, the second-largest producer in oil cartel Opec, is still not meeting its target under an Opec-led supply pact.

Russia, meanwhile, plans to cut its oil loadings from Baltic ports and Black Sea port Novorossiysk from August 1-10 by nearly a quarter compared with the corresponding period in July, according to a preliminary loading schedule and Reuters calculations, which could support prices.

Reuters