Source: Bloomberg News, by Elizabeth Low and James Thornhill
Oil held near $40 a barrel in New York after slumping on a surprise jump in U.S. gasoline stockpiles and slowing demand.
Motor fuel inventories last week rose the most since May and a measure of gasoline consumption slid to the lowest level since late September, according to government data on Wednesday. Analysts surveyed by Bloomberg expected stockpiles to decline for a third week. Meanwhile, progress was made on a U.S. stimulus package but there are doubts it will pass before the election.
Oil is stuck near $40 a barrel with a resurgent coronavirus raising concerns about a sustained recovery in consumption. The market is also facing rising supply from Libya and the prospect of additional crude from OPEC+ with cuts poised to ease in January. The group has described the outlook as precarious and will make a decision on its output policy at a meeting on Nov. 30-Dec. 1.
Slowing gasoline consumption is a “devastating read” for oil prices, signaling that Covid-19 is again starting to impact consumer behavior at the pump, said Stephen Innes, chief global marketing strategist at Axi. “The medium-term demand outlook remains the great unknown, with increasing social mobility restrictions in Europe.”
Brent’s three-month timespread was 99 cents a barrel in contango, compared with $1.33 at the start of the month. While there are still concerns about over-supply, the narrowing spread signals they have eased slightly.
U.S. gasoline stockpiles rose by about 1.9 million barrels last week, according to the Energy Information Administration. Crude inventories at the storage hub of Cushing increased for a fifth week to the highest level since May, while nationwide supplies decreased by 1 million barrels.
One bright spot amid a gloomy global picture for fuel consumption is China. Oil traders are buying up cargoes and sending them toward Asia’s biggest economy, hoping to capitalize on an expected surge in demand at the end of the year when independent refineries there get new import licenses for 2021.