Americas News
Inventory Rise Spooks Traders, Causes 4% Drop In Oil Prices
Oil prices dropped by 4 percent on Wednesday after data was released showing that gasoline stocks grew in the U.S. - which in itself is nothing unusual but traders took to be a sign that demand for refined products is weakening due to rising Covid infection rates.
Brent settled at $41.73 per barrel, down $1.43, or 3.3 percent; West Texas Intermediate dropped $1.67, or 4 percent, to $40.03.
Tony Headrick, energy markets analyst at CHS Hedging, said, "The market is seriously grappling with demand in the wake of a continued rise in Covid-19 cases, [and] Brent is particularly exposed to European regions which are undergoing new lockdowns."
Crude inventories rose by 584,000 barrels in the week to October 16 to about 490.6 million barrels, the American Petroleum Institute reported, versus analysts' expectations for a draw of 1 million barrels.
Still, for every sign of weakening demand comes news that the embattled energy sector continues to plug along, case in point: the series of mergers in U.S. shale accelerated with the news that Pioneer Natural Resources Co. agreed to buy Parsley Energy Inc. for $4.5 billion in stock, thus creating one of the largest producers in the Permian Basin.
Plus, all-important air travel is picking up: according to Vortexa Ltd., the cargo hub in Alaska saw record jet fuel imports from South Korea in the third quarter, and physical barrels of jet fuel in Los Angeles are trading at the smallest discount to Nymex futures in since July as the market for the fuel picks up (with departures in both Los Angeles and Asia Pacific nations increasing in the week ending October 20).
Still, Bank of America Corp. predicts a full recovery for middle distillates will not happen until 2023.
Meanwhile, the White House and the democrats are trying to agree upon a new coronavirus aid bill, now with the encouragement of president Donald Trump, and this caused Satoru Yoshida, a commodity analyst with Rakuten Securities, to remark, "Hopes for economic stimulus in the United States and other countries to combat pandemic-led slump in consumption are expected to cap losses."
