Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Oil Drops After Jump in U.S. Stockpiles and Gloomy IEA Forecast

Published 13/11/2020, 02:04
Updated 13/11/2020, 03:09
© Reuters.

© Reuters.

(Bloomberg) -- Oil fell for a second day -- dropping below $41 a barrel in New York -- after a surprise jump in U.S. crude stockpiles and a gloomy forecast from the International Energy Agency weighed on the demand outlook.

American crude inventories rose by 4.28 million barrels, climbing for a second week in three, according to data from the Energy Information Administration on Thursday. The IEA cut its global oil demand projections for this quarter by 1.2 million barrels a day in its latest monthly report.

Oil is still up 9% this week, however, after news of a potential Covid-19 vaccine breakthrough spurred a sharp jump in prices on Monday. The market has also been supported by indications that the OPEC+ alliance is closing in on a deal to delay a planned easing of output cuts.

While the vaccine news has provided oil with a strong tailwind, there’s still a lot of uncertainty about how quickly it could be rolled out. Three of the world’s top central bankers warned that it wouldn’t be enough to put an end to the economic challenges created by the pandemic. The IEA also cautioned the breakthrough won’t quickly revive energy markets that are being rattled by a second wave of Covid-19 that’s pummeling Europe and the U.S.

“The realities are setting in that the expectations for an immediate vaccine cure may be a bit far-fetched,” said Kim Kwangrae, an analyst at Samsung (KS:005930) Futures Inc. in Seoul. “Prices will be pressured in the short run as global demand stays suppressed with the unrelenting surge in coronavirus cases.”

Brent’s three-month timespread was 82 cents a barrel in contango -- prompt prices are cheaper than later-date ones. That’s near the narrowest contango since July, signaling concerns about over-supply have eased.

See also: China Oil Giant Eyes Brand New Supertankers to Shrink Fuel Glut

U.S. gasoline stockpiles fell by 2.31 million barrels last week, and distillate inventories, which includes diesel, dropped for an eighth week, the EIA said. Nationwide crude supplies were expected to decline by 1.9 million barrels, according to the median estimate in the Bloomberg survey.

OPEC+ meets at the end of the month to discuss its production policy and the alliance has already indicated it may need to defer increasing supply from the start of next year. Complicating the group’s efforts to manage the market is rising output from Libya, which now exceeds 1 million barrels a day.

©2020 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.