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- The OPEC + alliance is slowly reducing its production cuts.
- US crude stocks fell 0.3 percent to 494.4 million barrels in the week through September 18.
- Libya is unleashing a new supply as its civil war subsides.
Oil fell to $ 39 a barrel, even after a decline in US oil and fuel reserves following warnings about global energy demand and the state of the US economy.
Futures in New York fell 1 percent after rising for a second day on Wednesday. Federal Reserve officials stressed that increased fiscal stimulus is critical to sustaining the United States’ economic recovery, while the head of commodities trader Mercuria Energy Group said global oil markets will not be able to absorb production increases from the US. OPEC + as demand remains weaker than expected.
That was after the market found support on Wednesday from data from the Energy Information Administration showing US distillate inventories fell the most since March, while crude oil inventories fell for a second week.
After trading above $ 43 a barrel in late August, oil has tumbled lower this month amid signs that a coronavirus resurgence could lead to more lockdown measures. Meanwhile, the OPEC + alliance is slowly reducing its production cuts and Libya is unleashing new supply as the civil war subsides.
“The warning from Fed officials certainly weighed on US stocks and drove oil lower,” said Warren Patterson, head of commodity strategy at ING Bank NV.
Economic uncertainty and the recent recovery from Covid-19 cases will prevent oil from rising too high in the next two weeks and is likely to remain in a fairly narrow range, he said.
Brent’s three-month spread was $ 1.28 a barrel at Contango, where immediate contracts are cheaper than later-dated contracts, compared to $ 1.37 at the beginning of the week. The market structure indicates that while there is still concern about oversupply, it has eased slightly.
Oil reserves have been building up in September and will not shrink enough in the rest of the year to be in balance if OPEC + goes ahead with its plan to reduce production cuts early next year, the chief executive said. of Mercuria, Marco Dunand, in an interview. Meanwhile, Democrats and Republicans have disagreed on another virus relief package, with no formal negotiations since early August, even as Fed officials call for more fiscal support.
U.S. crude reserves fell 0.3% to 494.4 million barrels in the week through Sept. 18 and distillate inventories fell 1.9% to 175.9 million barrels, data showed. of the EIA.
