Oil struggles to recover after US petrol stocks build

[NEW YORK] Oil prices ticked up on Thursday, boosted by the possibility of an economic stimulus package in the United States, but struggled to recover fully from the previous session's losses when higher US petrol inventories signalled a deteriorating demand outlook as coronavirus cases soar.

Brent crude futures were 70 US cents higher at US$42.42 a barrel at 2.29pm EDT (1729 GMT) and US West Texas Intermediate (WTI) crude futures gained 59 cents to US$40.62.

Both crude contracts shed more than 3 per cent on Wednesday in their steepest daily falls in three weeks.

Futures gained momentum early Thursday as US House Speaker Nancy Pelosi said the two sides were nearing an economic stimulus package, boosting expectations that demand could improve, said Bob Yawger, director of Energy Futures at Mizuho in New York.

Shares on Wall Street also gained on Thursday in choppy trading, as investors cheered the prospect of more fiscal stimulus to support a pandemic-damaged US economy, with more data pointing to a slowing labor market recovery.

US petrol stocks rose by 1.9 million barrels last week, the Energy Information Administration (EIA) said on Wednesday, compared with expectations for a drop of 1.8 million barrels.

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Overall product supplied - a proxy for demand - averaged 18.3 million barrels per day (bpd) in the four weeks to Oct 16, the EIA said, down 13 per cent from the same period a year earlier.

Record new daily Covid-19 infection numbers in several US states and in Europe, along with further coronavirus lockdowns and China's crackdown on outbound travel, all bode ill for fuel demand.

Worsening the outlook, hopes that US lawmakers would reach agreement with the White House on an economic stimulus package dimmed late on Wednesday after President Donald Trump accused Democrats of holding up a compromise deal.

"(A deal) might improve the demand tone for a week or two," said Lachlan Shaw, head of commodity research at National Australia Bank.

Adding to the supply concerns, Libyan oil exports are quickly accelerating into October as loading restarts after the easing of a blockade by eastern forces.

Libyan production has recovered to about 500,000 bpd and the government in Tripoli expects that to double by the end of the year.

Goldman Sachs said it expects average Brent prices rising to US$59.40 next year from US$43.90 this year, and WTI increasing to US$55.90 from US$40.10.

REUTERS