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Oil steady as investors weigh stockpile gain against Asia demand
OIL was steady near US$41 a barrel as investors weighed an industry report pointing to a bigger-than-expected increase in US crude stockpiles against signs of a robust demand recovery in Asia.
Futures were little changed after slipping as much as 0.8 per cent earlier. The American Petroleum Institute reported that crude inventories swelled by 4.17 million barrels last week, according to people familiar. If confirmed by official data on Wednesday, it would be more than double the expected gain seen in a Bloomberg survey. Rising stockpiles come as more restrictions are being rolled out across the US as well as Europe to curb the virus spread, delaying a global oil recovery and offsetting the return of Asian demand.
An Opec+ committee meeting, meanwhile, ended without a concrete signal that producers will reverse plans to increase output early next year, although the panel of ministers told the group to be ready to act when needed.
Oil rallied above US$42 a barrel on Monday after news of another Covid-19 vaccine breakthrough, but prices have since lost some ground as the market grapples with an uneven demand recovery.
A resurgent virus in Europe and the US is sapping fuel consumption, compared with Asia where China's rebound is accelerating and refiners are buying more crude. Processors in China, Japan and South Korea snapped up cargoes from Russia, the Middle East and the US, leading to a gain in physical crude prices. Buying interest has been strong after some refiners got less oil than usual in term supply contracts from Opec producers Saudi Arabia and Iraq.
"The vaccine news-induced peaks are proving unsustainable as the oil complex balances the view between a future promise and current realities," said Vandana Hari, founder of consultancy Vanda Insights in Singapore.
Asian oil demand is expected to continue recovering through the next three-to-four months, somewhat offset by a slump in European demand, she added.
US crude inventories rose by 1.6 million barrels last week, according to the median estimate in the survey before Energy Information Administration data. Separately, API figures also showed that gasoline stockpiles gained by 256,000 barrels. If confirmed by the EIA, it would be the second gain in three weeks.
Opec+ is scheduled to gather at the end of the month for a ministerial meeting that will set its production policy. BLOOMBERG