By Gina Lee
Investing.com – Oil was down on Wednesday morning in Asia, with the American Petroleum Institute (API)’s announcement of a surprise build in U.S. crude supplies adding to mounting oversupplies worries. The return of Libyan production and fears of weakening fuel demand as the number of COVID-19 cases continues to tick upwards globally also dampened investor sentiment.
Brent oil futures fell 0.65% to $43.88 by 11:56 PM ET (3:56 AM GMT) and WTI futures were down 0.55% to $41.47. Although Brent and WTI futures reversed their gains from the previous session, both stayed above the $40 mark.
API on Tuesday reported a 584,000-barrel build in the week to Oct.16, against the forecast 1.9-million-barrel draw and the previous week’s draw of 5.422 million barrels. Investors are now looking to data from the U.S. Energy Information Administration, due later in the day.
“Higher U.S. inventory fuelled concerns of oversupply at a time when the coronavirus cases are rising worldwide, which could hamper a recovery in fuel demand,” Rakuten Securities commodity analyst Satoru Yoshida told Reuters.
Fuel demand continues to weaken as some countries in Europe saw the re-implementation of restrictive measures, including lockdowns, to curb the uptick in the number of COVID-19 cases in the region. There are over 40.7 million cases globally as of Oct. 21, according to Johns Hopkins University data.
OPEC+’s plan to ease production cuts in January, from the current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd, combined with weak demand, increased fears of an oversupply. Also adding to those fears was the return of Libyan production, pumping more oil into an already-saturated market. Libya is an OPEC member, but exempt from productions cuts.
However, Russian energy minister Alexander Novak warned on Tuesday it was too early to discuss global oil production curbs beyond December, less than a week after he called for discussions on reducing the output restrictions.
Meanwhile, the U.S. reported progress for the passage of the latest stimulus measures on Tuesday after President Donald Trump indicated his willingness to up the measures’ price tag.
“Hopes for economic stimulus in the United States and other countries to combat pandemic-led slump in consumption are expected to cap losses, but planned reduction in output cuts by OPEC+ will also limit any future gains,” Rakuten Securities’ Yoshida said.