Crude oil futures fall on US crude build, pandemic concerns

Singapore — 0251 GMT: Crude oil futures fell during the mid-morning trade in Asia Nov. 13, extending overnight losses, after the US Energy Information Administration data showed a large build in US crude inventories, while concerns over the progression of the coronavirus pandemic continued to weigh on the market.

At 10:51 am Singapore time (0251 GMT), ICE Brent January crude futures were down 73 cents/b (1.68%) from the Nov. 12 settle to $42.80/b, while the NYMEX December light sweet crude contract was down 83 cents/b (2.02%) at $40.29/b. Both markers had fallen 0.62% and 0.80% on Nov. 12 to settle at $43.53/b and $41.12/b, respectively.

The downward trajectory of crude prices comes as data from the EIA showed that, amid an unseasonable pullback in refinery demand, commercial crude stocks had climbed 4.28 million barrels to 488.71 million barrels in the week ended Nov. 6. This large build in crude inventories came as a surprise to the market, with analysts having told S&P Global Platts earlier that they were expecting a 3 million-barrel draw in inventories in the same week.

The EIA data was also contrary to the data released by the American Petroleum Institute on Nov. 10, which had earlier boosted market sentiment by showing a 5.147 million-barrel decline in the week ended Nov. 6.

Stephen Innes, chief global market strategist at AXI, said in a Nov. 13 note: "Unequivocally the market needed a comparable draw [from the EIA data as was seen in the API data] to keep the vaccine trade momentum going."

The EIA data was not all bearish, however, as it also indicated improved fundamentals in downstream oil markets, with gasoline inventories having declined 2.31 million barrels to close to a one-year low of 225.37 million barrels, and distillate inventories having declined 5.36 million barrels to 149.29 million barrels, a six-month low.

Additionally, the data showed that total products supplied, EIA's proxy for demand, had climbed 1.82 million b/d to an eight-month high of 20.18 million b/d, with gasoline demand climbing 430,000 b/d and distillate demand rising 290,000 b/d.

However, the bullish aspects of the EIA data release did not make much of an impact on the market, which is growing more anxious over the escalation of the coronavirus pandemic in the US, where states have re-introduced restrictions. COVID-19 infections in Japan reached a new daily high on Nov. 12, according to media reports, while most of Europe remains under some degree of lockdown.

Against the backdrop of the pandemic, the International Energy Agency said in its Nov. 12 report that global oil demand will plunge by 8.8 million b/d in 2020, a downward revision of 400,000 b/d from its previous forecast. This follows the OPEC's downward revisions of oil demand by 280,000 b/d for 2020 and by 580,000 b/d for 2021, made a day earlier.

The IEA said that although vaccines, like the one being developed by Pfizer and BioNTech, may contribute to a recovery in oil demand in the second half of 2021, the near-term outlook remains sombre.

ANZ analysts echoed the above sentiment, as they said in a Nov. 13 note: "The outlook for crude oil demand has darkened because of new pandemic restrictions."