Picture: REUTERS/CARLOS GARCIA RAWLINS
Picture: REUTERS/CARLOS GARCIA RAWLINS

Singapore/Sydney — Oil held a loss — but remained near a five-month high — as an industry report pointing to another drop in US crude stockpiles was overshadowed by the coronavirus and a lack of progress on US stimulus talks.

Futures in New York were steady near $42 a barrel after losing 0.8% on Tuesday. The American Petroleum Institute (API) reported inventories fell by 4.01-million barrels last week, according to people familiar with the data. That would be the third consecutive weekly drop if confirmed by government figures.

Virus infections breached 20-million globally, Florida reported another day of record deaths and New Zealand’s largest city went back into lockdown after a fresh outbreak. The S&P 500 stock benchmark fell for the first time in eight sessions on Tuesday, with some traders citing comments from Senate majority leader Mitch McConnell saying stimulus talks are at a stalemate as a catalyst.

Oil is struggling to climb above its 200-day moving average as the uncertainty over the trajectory of the demand recovery from the pandemic keeps gains in check and Opec-plus returns some barrels to the market. Drilling activity in the US, the world’s biggest producer, is not likely to be rebound until 2021 unless prices move back towards $50 a barrel in the next few weeks, Rystad Energy said in a note.

The API numbers lent some support, but prices are likely to be capped at recent highs, said Warren Patterson, head of commodities strategy for ING Bank NV. “The recovery in demand is still a big worry for the market, particularly given that Opec-plus supply is edging higher.”

The contango in the three-month time spread for the global crude benchmark was $1.23 a barrel, widening from $1.03 at the end of last week. The change in the market structure — where prompt prices are cheaper than later-dated ones — is an indication that concern around oversupply is increasing.

US crude oil production will be 11.26-million barrels a day in 2020, the Energy Information Administration forecast, down from July’s 11.63-million estimate. Petrol and distillates stockpiles also fell last week, the API said, while inventories at the Cushing storage hub rose by 1.1-million barrels.

Bloomberg

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