Oil futures fell in midweek as a surprise rise in weekly US stockpiles fuelled worries that the resurgence of Covid-19 infection cases around the globe will continue to weigh on demand for the foreseeable future.
Selling pressure had resurfaced on Monday amid spiralling coronavirus cases and plans by Libya to restore output following the lifting of the blockade of North Africa’s major export terminals and oilfields.
Prices gained more than 1% on Tuesday, however, on the prospect that US lawmakers were nearing a coronavirus stimulus package deal to aid economic recovery in the world’s biggest energy consumer.
Investors are following the talks between US House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over a potential fresh aid package.
Pledges of support from leading producers Saudi Arabia and Russia helped limit the losses.
According to Bloomberg, global crude benchmark Brent closed at $41.73 per barrel as of 5:59 p.m. Eastern Standard Time (EST) on Wednesday, down from the previous week’s level of $43.10 per barrel. US West Texas Intermediate closed at $40.02 per barrel as of 6:04 p.m. EST on Wednesday.
US inventories rose last week while gasoline and distillate inventories fell, data from industry group the American Petroleum Institute showed on Tuesday.
Crude inventories rose by 584,000 barrels, while gasoline stocks fell by 1.6 million barrels. Distillates, which include diesel and heating oil, fell by 6 million barrels.
Libya’s biggest oilfield, Sharara, resumed operations last week at an initial rate of some 40,000 barrels per day. The field was already pumping around half its 300,000 bpd capacity on Monday.
The market’s gaze returned to an Opec+ ministerial monitoring committee meeting on 19 October, with Russian Energy Minister Alexander Novak saying the committee recommended sticking to the group’s deep supply curbs.
Saudi Arabia said no one should doubt the group’s commitment to providing support, suggesting the Opec+ alliance could delay a planned easing of supplies in January.
Opec+ — a grouping of Opec and allies including Russia — is curbing oil production by 7.7 million bpd, down from cuts totalling 9.7 million bpd, and is due to reduce the cuts by a further 2 million bpd in January.
However, the group pledged action to support the oil market as concerns mounted about a second wave of the coronavirus pandemic that has led to a sharp decline in aviation and other major forms of transport.
Russian President Vladimir Putin and Saudi Arabia’s Crown Prince Mohammed bin Salman held two phone conversations last week, with the Kremlin saying regular contact was necessary to ensure price stability. Saudi Arabia made it clear it will not lower its guards.
“This group has shown, especially in this year, that it has the flexibility to adapt to changing circumstances when required.
"We will not dodge our responsibilities in this regard,” Saudi Energy Minister Prince Abdulaziz bin Salman said.
“Nobody in the market should be in any doubt as to our commitment and our intent,” Prince Abdulaziz told the opening of an Opec+ Joint Ministerial Monitoring Committee (JMMC).
Industry analysts, including those from US bank JP Morgan, believe weak demand outlook could prompt Opec+ to delay the reduction in output curbs.
“Demand recovery is uneven. Today this process has slowed down because of a second coronavirus wave, but has not yet fully reversed,” Novak told the JMMC.
Novak had previously insisted on easing the supply curbs to help meet rising demand.