(Bloomberg) — Oil held a loss to trade near $41 a barrel after analysts forecast U.S. crude stockpiles continued to swell last week, overshadowing expectations for a dovish statement from the Federal Reserve.
Futures in New York were steady in Asian trading after closing down 1.4% on Tuesday. U.S. inventories grew by 450,000 barrels last week, according to a Bloomberg survey, which would be the third increase in four weeks. The American Petroleum Institute reported a 6.83-million-barrel drop in stockpiles, but said that gasoline supplies rose, according to people familiar with the data.
Investors are waiting for the conclusion of the Fed’s policy meeting on Wednesday, with the U.S. central bank expected to signal it will keep interest rates near zero for longer as the coronavirus continues to surge. Florida reported a record death toll, while a resurgence of cases across the Asia-Pacific is being viewed as an early warning sign for the rest of the world.
After rebounding swiftly from April lows, crude prices have struggled to find direction in recent weeks as the resurgent pandemic threatens the global energy demand recovery. Consultant Rystad Energy said it expects a second virus wave and additional barrels from the OPEC+ alliance to result in a global supply glut for the next four months.
The demand outlook has become a key driver for oil and, given there’s still a lot of uncertainty about the global economic recovery, prices are vulnerable to swings in sentiment, said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific in Sydney. If there’s a build in U.S. stockpiles, West Texas Intermediate could test $40 a barrel, he said.
The global crude benchmark’s three-month timespread was $1.12 a barrel in contango — where near-dated contracts are cheaper than later-dated ones — compared with 41 cents in contango at the end of June. The change in the market structure indicates concerns about over-supply have risen this month.
The API reported a 1.08 million barrel increase in gasoline stockpiles last week and a 187,000 barrel rise in distillates inventories. The official Energy Information Administration data is due later on Wednesday. American motor fuel demand will have a hard time exceeding 2019’s average of 9 million barrels a day this year, according to industry consultant FGE.
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