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Crude falls on bearish API data, concerns over coronavirus restrictions

Singapore — 0153 GMT: Crude oil futures took a dive during the mid-morning trade in Asia on Oct. 28, erasing most of their overnight gains, as the market grew anxious over a large build in the US crude inventories and over prospects of nationwide lockdowns in Europe, where countries are struggling to contain the second wave of the coronavirus pandemic.

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At 9:53 am Singapore time (0153 GMT), ICE Brent December crude futures were down 67 cents/b (1.63 %) from the Oct. 27 settle to $40.53/b, while the NYMEX December light sweet crude contract was down 75 cents/b (1.90%) at $38.82/b. Both markers had jumped 1.83% and 2.62% to settle at $41.20/b and $39.57/b, respectively, on Oct. 27, after Hurricane Zeta shuttered 55.35% of US Gulf crude output.

The fall in oil prices in the morning comes after the American Petroleum Institute reported on Oct. 27 that US crude inventories had risen by 4.577 million barrels in the week ended Oct. 23, indicating that fundamentals in the market remained weak.

The API fueled further bearish sentiment through its reports of a 2.252 million-barrel build in US gasoline inventories. Consequently, a 5.333 million-barrel draw in distillate inventories did nothing to pacify the market.

At 9:53 am Singapore time, the NYMEX November RBOB contract was trading 2.22 cents/gal (1.94%) lower than the Oct. 27 settle at $1.1212/gal and NYMEX November ULSD contract was down by 1.73 cents/gal (1.49%) at $1.1404/gal.

Meanwhile, concerns over the surge in coronavirus cases Europe persisted, as the possibility of tighter restrictions, including nationwide lockdowns, threatened to derail demand recovery.

Stephen Innes, chief market strategist at AXI, said in an Oct. 28 note: "The doomy mood music's soundboard remains tuned to growing concerns about rising Covid-19 case counts, and reflationary hopes are fading fast with the French lawmakers taking a frightful economic step back into the Covid full stop abyss and likely to impose a nationwide lockdown, with the Eurozone's Economic juggernaut Germany likely to follow suit."

The onslaught of bearish factors has negated any boost the market may have received from curtailed production in the US Gulf, where producers are bracing for the arrival of Hurricane Zeta.

According to data from the US Bureau of Safety and Environmental Enforcement, as of Oct. 27, 914,811 b/d of crude output, or 55.35% of the US Gulf's crude capacity, had been taken offline and 25% of the region's platforms and rigs, or 157 facilities, had been evacuated.

Chevron, Shell, BP, BHP, Murphy Oil and Equinor confirmed that they had shut down platforms and production ahead of the storm, with BP and Chevron among producers shutting-in all of their operated platforms, S&P Global Platts reported earlier.