New York — Oil prices dropped Wednesday after U.S. inventory figures showed demand weakening for refined products as global COVID-19 cases spiked.
Brent crude futures LCOc1 were at $41.64 a barrel, down $1.51, or 3.5%, as of 12:48 p.m. ET (1648 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 futures dropped $1.72, or 4.1%, to $39.98. Both benchmarks rose in the previous session.
Crude inventories fell by 1 million barrels in the week to Oct. 16 to 488.1 million barrels, while gasoline stocks rose in another weak showing for fuel demand.
Overall product supplied, a proxy for demand, remained down 13% on the year and over the past four weeks when compared with the year-ago period.
“The market is seriously grappling with demand in the wake of a continued rise in COVID-19 cases,” said Tony Headrick, energy markets analyst at CHS Hedging.
Adding to pressure, worldwide COVID-19 cases crossed 40 million on Tuesday, with some parts of Europe imposing renewed lockdown measures.
“Brent is particularly exposed to European regions which are undergoing new lockdowns,” Headrick said.
On the supply side, Russia’s energy minister said on Tuesday it was too early to discuss the future of global oil production curbs beyond December, less than a week after saying plans to scale back existing output restrictions should proceed.
Earlier this year the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – together known as OPEC+ – agreed to trim production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd.
At the same time, OPEC member Libya, which is exempt from the cuts, is also ramping up production after armed conflict shut almost all its output in January. Production has recovered to about 500,000 bpd with Tripoli expecting that figure to double by year-end.
The battle over a hefty, new U.S. coronavirus aid bill was set to spill into Wednesday as the White House and Democrats try to strike a deal before the Nov. 3 presidential and congressional elections, now with the encouragement of President Donald Trump.
*Laura Sanicola, Julia Payne, Yuka Obayashi; Editing: David Gregorio, Louise Heavens & Giles Elgood – Reuters