Oil Prices Fall as Surprise Build in Gas Supplies Adds to Demand Jitters

© Reuters.

By Yasin Ebrahim

AiVIF.com – Crude oil prices fell Wednesday, as a surprise increase in gasoline supplies exacerbated concerns about fuel demand and offset the larger than-expected draw in crude supplies.

On the New York Mercantile Exchange crude futures for October delivery fell by $1.13 to settle at $65.21 a barrel, while on London's Intercontinental Exchange (NYSE:ICE) Brent slipped $0.80 to trade at $68.23 a barrel.

Inventories of U.S. crude fell by 3.2 million barrels for the week ended Aug. 13., exceeding expectations for a draw of 1.1 million barrels, according to data from the Energy Information Administration

The large draw in crude supplies comes as imports fell by about 36,000 barrels per day (bpd), while exports increased by about 1.78 million bpd, data from EIA showed. Production, meanwhile, was steady at 11.3 million bpd, up 100,000 bpd from last week.

Gasoline inventories increased by 696,000 barrels, confounding expectations for a draw of 1.7 million barrels, while supplies of distillate -- the class of fuels that includes diesel and heating oil -- fell by 2.7 million barrels, above expectations for an increase of 0.651 million barrels.

Refinery activity improved to 91.8% of their capacity last week from 91.3% the prior week, with crude inputs averaging about 16.2 million barrels per day, up 15.9 million barrels from the prior week, the EIA said.

Oil prices made a poor start the week, and look set to deepened losses as rising coronavirus cases in the U.S. and abroad, particularly in Asia, have weighed on the oil demand outlook amid fears that rising Covid-19 infections will stifle travel activity.

Against growing worries about the oil demand, some analysts are forecasting supply could outstrip supply, when OPEC and its allies moves ahead with plans to lift production.

"By our calculations, the oil market will already show a slight supply surplus in the second half year if OPEC+ raises production by 400,000 barrels per day each month as planned and returns to 100% compliance," Commerzbank (DE:CBKG) said in a note.