WTI Holds Below $38 After Surprise Crude Build Raises Demand Fears

Oil prices are sliding once again this morning, with WTI unable to hold above $38 as concerns over rising American crude stockpiles pick up as global oil demand is expected to decline over 8 million barrels a day this year and likely won’t get back to 2019 levels before 2022, according to S&P Global Platts. At the same time, OPEC and its allies are unleashing crude back onto a market that’s still working through the inventory glut it built up earlier this year.

“Uncertain oil-market fundamentals are holding prices back,” said Jens Pedersen, a senior analyst at Danske Bank. The “climb in U.S. crude stocks plays into the market worries over weak demand.”

After last night’s surprise build in crude stocks reported by API, all eyes are back on official data for signs of a growing glut.



After 6 straight weeks of draws, US crude stocks built last week by over 2 million barrels

Source: Bloomberg

US Crude Production barely bounced back after last week’s storm-related shut-ins.

Source: Bloomberg

WTI held below $38 on the official data…

Finally, we note that Brent’s six-month timespread was $2.71 a barrel in contango – where prompt prices are cheaper than later-dated ones – compared with $1.97 at the end of August. The change in the market structure indicates growing concern about a glut and may also, together with falling tanker rates, incentivize floating storage.

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