Oil slips amid unexpected increase in US stockpiles

Tokyo — Oil prices dipped on Wednesday after industry data showing a build in US crude stockpiles added to the worry about oversupply, but the hope for a swift economic recovery in China limited losses.

Brent crude futures fell 10c, or 0.2%, to $42.98 a barrel by 4.17am GMT. US West Texas Intermediate (WTI) crude futures dropped 12c, or 0.3%, to $40.50 a barrel, holding to the narrow range of the past few weeks.

“The market is mixed as optimism about China’s quick economic rebound is offset by persistent worries that the rising coronavirus cases in the US and other areas will stall a recovery in fuel demand,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

“We expect the WTI to stay in the $38.50-$41.50 range for the next couple of weeks,” he said.

US crude oil stockpiles rose last week, against expectations for a draw, though petrol and distillate inventories fell more than expected, data from industry group the American Petroleum Institute (API) showed.

Adding to pressure, the US Energy Information Administration (EIA) said on Tuesday that US crude oil production is expected to fall by 600,000 barrels a day in 2020, a smaller decline than the 670,000 barrel a day it forecast previously.

However, it also expected global oil demand to recover through the end of 2021.

“The EIA’s forecast of a lower decline in US output was partially cushioned by its outlook for firm demand recovery, which limited losses in oil markets,” Hiroyuki Kikukawa, general manager of research at Nissan Securities said.

“Still, expectations that Opec and allies would taper oil output cuts from August and softer US equities added to pressure,” he said.

Abu Dhabi National Oil Co (ADNOC) plans to boost oil exports in August, the first signal that Opec and its allies, together known as Opec-plus, are preparing to ease record oil output cuts next month, three sources familiar with the development told Reuters.

Key ministers in the Opec-plus grouping are due to hold talks next week.

Meanwhile, the US coronavirus outbreak crossed a grim milestone of more than 3-million confirmed cases on Tuesday as more states reported record numbers of new infections. 

Reuters

Source: businesslive.co.za