Oil futures fall as US gasoline inventories build, COVID-19 cases surge

Singapore — 0328 GMT: Oil futures slipped during mid-morning trade in Asia Sept. 30, extending overnight declines, as a build in US gasoline inventories fueled bearish sentiment in a market already reeling from the resurgence of the coronavirus pandemic.

At 11.28 am Singapore time (0328 GMT), ICE Brent November crude futures were trading at $40.55/b, down 48 cents/b (1.17%) from the Sept. 29 settle, while the NYMEX November light sweet crude contract was at $38.85/b, down 44 cents/b (1.12%). These international crude markers had ended the Sept. 29 trading session sharply lower as the November contract for Brent and WTI dived 3.30% and 3.23% on the day, respectively, to settle at $41.03/b and $39.29/b.

The downtrend in crude futures came as the American Petroleum Institute reported a 1.623 million-barrel build in gasoline inventories for the week ended Sept. 25. This report was yet another reminder to the market that demand for oil products remain weak, and had offset any positive sentiment from the API's report of a 831,000-barrel crude inventory draw during the same week.

RBOB futures for November fell 2 cents/gal (1.47%) from the Sept. 30 settle and was now trading at $1.184/gal.

Market analysts also attributed the falling crude markers to a surge in the rate of positive coronavirus cases in New York City, which has tripled over the past few days to 3%.

Edward Moya, senior market analyst at OANDA, said in a Sept. 30 note: "If New York city [gets] close to seeing restrictive measures before we have the winter wave of the virus, crude demand expectations will likely get severely downgraded."

Meanwhile, concerns on the supply side of the equation heightened, as uncertainties arose over adherence to the OPEC+ oil production quotas.

News that Russia may exceed its production quota hit the oil market, which was already anxious over Iraq's non-compliance to the OPEC+ agreement following reports of more October-loading Iraqi crude cargoes.

ANZ analysts said in a Sept. 30 note: "Supply side developments were not supportive, as Russia is likely to exceed its OPEC+ quota and risks loom over the production-cut tapering agreement."

The prospect of increased crude oil from Libya is also weighing the markets down, as the OPEC+ member is now pumping 250,000 b/d and has resumed exports from three key eastern terminals -- Brega, Marsa el-Hariga and Zueitina, S&P Global Platts reported on Sept. 29.