Oil prices drop as rising US stock increases supply glut concerns

21 October 2020 (Last Updated October 21st, 2020 11:29)

Oil prices slipped as a surprise increase in US crude inventory increased global supply glut concerns.

Oil prices drop as rising US stock increases supply glut concerns
Brent crude futures for December delivery fell 23 cents to $42.93 a barrel. Credit: C Morrison from Pixabay.

Oil prices slipped as a surprise increase in US crude inventory increased global supply glut concerns.

Brent crude futures for December delivery fell $0.23 to $42.93 a barrel while the December US West Texas Intermediate (WTI) crude futures slipped $0.20 to trade at $41.50 a barrel, reported Reuters.

According to American Petroleum Institute data, crude inventories increased by 584,000 barrels in the week to 16 October, against analysts’ expectations of a drop of one million barrels.

The oil market was also affected by the global increase in Covid-19 cases, which may further reduce fuel demand.

The total number of Covid-19 cases crossed 40 million this week while the number of fatalities increased to 1.1 million.

Sunward Trading chief analyst Chiyoki Chen was quoted by the news agency: “A US inventory build, together with the recent resurgence of the Covid-19 cases worldwide, prompted investors to make position adjustments.”

On the supply side, it is still not confirmed if the OPEC+ members, a group comprising Organization of the Petroleum Exporting Countries (OPEC) states and other allies, will extend the supply cuts beyond December.

The group has cut crude production to revive falling oil prices. However, Russia has announced its intention to proceed with reducing the production restrictions from January, as earlier decided.

Separately, the oil prices received some support as the US administration and the Congress moved closer to agree on a Covid-19 relief package.