Oil Stuck with Gains Capped by Rising Stockpiles

(Bloomberg) -- Oil was anchored near $41 a barrel in New York with swelling U.S. crude stockpiles raising fresh concerns about supply, while coronavirus cases continued to surge across the world.

Stockpiles at the key storage hub of Cushing expanded for the first time since early May as nationwide inventories unexpectedly rose last week, according to government data. Meanwhile, California and Texas recorded some of their biggest daily gains in cases and deaths, Australia’s second-largest city went into lockdown and Iran reported its deadliest day yet. Oil has traded within a tight range this month and is poised to end the week little changed.

Oil is struggling to extend its rally after rebounding from a plunge below zero in April amid concerns rising virus cases may derail the demand recovery. Some are predicting a long recovery from the outbreak, with Standard Chartered Plc estimating oil consumption next year will only be at 2017 levels, meaning the pandemic would have destroyed four years of growth.

U.S. crude stockpiles rose by 5.65 million barrels last week, while Cushing inventories increased by 2.2 million, the Energy Information Administration reported on Wednesday. However, gasoline supplies declined by the most since March, led by the East Coast, suggesting that more people are hitting the road.

“We are not out of the woods yet in terms of how we are coping with demand disruptions from the coronavirus,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. The increase in U.S. crude stockpiles to near record highs is concerning, he added.

Prices

West Texas Intermediate for August delivery lost 8 cents to $40.82 a barrel on the New York Mercantile Exchange as of 7:50 a.m. London time after rising 0.7% on Wednesday Brent for September settlement was little changed at $43.25 a barrel on the ICE Futures Europe exchange after adding 0.5% in the previous session Brent’s three-month timespread was 59 cents in contango, where prompt prices are cheaper than later-dated contracts

Crude exports from OPEC member Libya remain constrained by ongoing unrest. A paramilitary force charged with safeguarding the nation’s oil ports blocked attempts on Wednesday to load a tanker with crude, ignoring appeals by the state-run energy company.

--With assistance from Saket Sundria.

To contact the reporters on this story:
Low De Wei in Singapore at dlow47@bloomberg.net;
James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Ben Sharples, Andrew Janes