London — Oil steadied near $47 a barrel in New York after coming under pressure from signs of increased US supply and the resurgence of the pandemic.
West Texas Intermediate (WTI) futures recouped earlier losses, though remain about 4% down this week. The American Petroleum Institute (API) said US crude inventories rose by 2.7-million barrels last week, according to people familiar with the data. That would be the second weekly increase in three if confirmed by official figures due later on Wednesday.
A suggestion by US President Donald Trump that he might not sign a stimulus bill into law also weighed on financial markets.
The new Covid-19 strain — which is possibly already in the US, Germany, France and Switzerland — is raising the risk of more stay-at-home measures that would sap energy demand. The UK is considering putting more people under a severe lockdown to halt its spread.
“Jitters surrounding the new strain of the virus remain front and centre,” said Stephen Brennock, an analyst at PVM Oil Associates. “The spectre of fresh restrictions now hangs over Europe together with the prospect of a drawn-out recovery.”
The threat to near-term demand from the virus mutation has rippled across crude markets.
Brent’s prompt time-spread has moved back into contango, a bearish market structure in which near-dated prices are cheaper than later-dated ones. Global demand for oil liquids won’t return to pre-virus levels until early or mid-2022, according to Gazprom Neft CEO Alexander Dyukov.
The passage of the second-biggest economic rescue package in US history through both chambers failed to revive oil prices earlier in the week. Trump said he might not sign the $900bn plan unless stimulus cheques are increased.
US distillate stockpiles increased by 1.03-million barrels last week, while there was a small decline in petrol inventories, according to the API. Analysts surveyed by Bloomberg are forecasting a 3-million barrel drop in crude stockpiles ahead of the Energy Information Administration (EIA) data.