Crude oil futures fall on bearish US stocks data, surging Libyan production

0156 GMT: Crude futures were lower in mid-morning trade in Asia Oct. 21, erasing overnight gains, after data from the American Petroleum Institute pointed to a build in US crude inventories and an oil production ramp-up in Libya gathered pace.

At 9:56 am Singapore time (0156 GMT), ICE Brent December crude futures were down 31 cents/b (0.72%) from the Oct. 20 settle at $42.85/b, while the NYMEX December light sweet crude contract was 29 cents/b (0.7%) lower at $41.41/b. The markers closed 1.27% and 1.55% higher, respectively, Oct. 20 on increased optimism over US fiscal relief.

The fall in mid-morning Asia trade came after the API reported late Oct. 20 that US crude inventories rose 584,000 barrels to 490.6 million barrels in the week ended Oct. 16.

The build caught market watchers by surprise, as US fundamentals were assumed to be improving after a 5.4 million-barrel draw in API data the week before.

While the API data also showed gasoline and distillate inventories fell by 1.6 million barrels and 6 million barrels respectively in the week ended Oct. 16, these indications of improved downstream demand did little to support the crude markers.

At 9:56 am Singapore time, the NYMEX November RBOB contract was trading 0.70 cents/gal (0.59%) lower than at the Oct. 20 settle at $1.1809/gal and the November ULSD contract was down 0.41 cents/gal (0.35%) at $1.1694/gal.

Supply-side concerns were heightened by reports that Libya's crude and condensate output had more than quadrupled in a month to 500,000 b/d Oct. 20 and the 70,000 b/d Abu Abttifel became the country's latest oil field to restart production on Oct. 19, industry and trading sources said. The Sharara field, which restarted Oct. 11, is currently producing at 160,000 b/d and is expected to ramp up to 250,000 b/d within 7-10 days.

The recovery in Libyan production may lead to a supply glut in markets reeling from a lack of demand, especially if OPEC+ proceeds with the relaxation of production cuts scheduled from 2021.

Market sources however remain optimistic the OPEC+ alliance will reconsider its scheduled increase of almost 2 million b/d, despite no clear indications emerging from the OPEC+ Joint Ministerial Monitoring Committee meeting on Oct. 19.

"If the ramp-up of Libyan production and the pace of the global demand recovery is a problem for the oil price, recent OPEC intervention activity suggests a strong chance of reacting," AxiCorp chief market strategist Stephen Innes said in an Oct. 21 note.