Oil retreated to close $38 a barrel after a U.S. industry report signaled a surprise jump in crude inventories. Underscoring the market’s patchy road to rebalancing. Futures dropped 1.6% in NY. The American Petroleum Institute reported that stockpiles expanded by 8.42 million barrels last week, consistent with people conversant in the info. If confirmed by government figures afterward Wednesday, it might be the most important build since the top of April. Inventories at a key European hub jumped to a two-year high last week, Genscape Inc. reported.
Oil’s recovery from the virus-driven demand crash and swollen stockpiles remain uneven. Consumption is showing signs of an uptick in India, where Indian Oil Corp. is boosting processing at its refineries this month. Still, the OECD is forecasting a pointy contraction within the global economy this year, and one that would worsen if there’s a second wave of virus infections.
“Indications from the American Petroleum Institute show that stocks built quite a lot,” said Rystad Energy head of oil markets Bjornar Tonhaugen. “Shut-in production returning and an increase in Covid-19 cases scare traders — and markets.”
The weakness in crude prices
The weakness in crude prices has also been amid a softer market structure in recent days. Brent futures for August were at their biggest discount to September this month on Wednesday. Similarly, key swaps that help price North Sea crude have softened thus far in the week. Consistent with data from brokerage Eagle Commodities.
Meanwhile, the chaos engulfing OPEC member Libya continued, with the Sharara and El-Feel fields stopping production after brief restarts. Armed groups have forced halts in both fields, just days after the nation’s refining industry was showing signs of restarting.
Supplies of U.S. distillates, which include diesel, rose by 4.27 million barrels last week. While crude stockpiles at the storage hub of Cushing, Oklahoma, fell by 2.29 million barrels. The API reported. The Energy Information Administration is predicted to report nationwide crude inventories dropped by 1.85 million barrels, consistent with a Bloomberg survey.
