Oil held a loss — but remained near a five-month high — as an industry report pointing to another drop in American crude stockpiles was overshadowed by the coronavirus and a lack of progress on US stimulus talks.
Futures in New York were steady near $42 a barrel after losing 0.8% Tuesday. The American Petroleum Institute reported inventories fell by 4.01 million barrels last week, according to people familiar with the data. That would be the third straight weekly drop if confirmed by government figures.
Virus infections breached 20 million globally, Florida reported another day of record deaths and New Zealand’s largest city went back into lockdown after a fresh outbreak. The S&P 500 stock benchmark fell for the first time in eight sessions on Tuesday, with some traders citing comments from Senate Majority Leader Mitch McConnell saying stimulus talks are at a stalemate as a catalyst.
Oil is struggling to climb above its 200-day moving average as ongoing uncertainty over the trajectory of the demand recovery from the pandemic keeps gains in check and OPEC+ returns some barrels to the market. Drilling activity in the US, the world’s biggest producer, isn’t likely to be rebound until next year unless prices move back toward $50 a barrel in the next few weeks, Rystad Energy said in a note.
The API numbers lent some support, but prices are likely to be capped at recent highs, said Warren Patterson, head of commodities strategy for ING Bank NV. “The recovery in demand is still a big worry for the market, particularly given that OPEC+ supply is edging higher.”
The contango in the three-month timespread for the global crude benchmark was $1.23 a barrel, widening from $1.03 at the end of last week. The change in the market structure — where prompt prices are cheaper than later-dated ones — is an indication that concern around over-supply is increasing.
American crude oil production will be 11.26 million barrels a day this year, the Energy Information Administration forecast, down from July’s 11.63 million estimate. Gasoline and distillates stockpiles also fell last week, the API said, while inventories at the Cushing storage hub rose by 1.1 million barrels.
