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Crude Inventory Build Forces Oil Prices Lower

Crude oil price fell further after the Energy Information Administration reported an inventory increase of 4.3 million barrels for the week to October 23.

This compares with a decline of 1 million barrels for the previous week, which helped prop up prices for a short while before concerns about demand prevailed once again amid surging Covid-19 cases in Europe and the United States.

At 492.4 million barrels, crude oil inventories are 9 percent above the five-year average for this time of the year, when demand declines for seasonal reasons, so more builds are to be expected.

Yet the biggest factor contributing to inventory movements right now remains the coronavirus, which is again infecting record numbers of people in the United States: the seven-day average of newly diagnosed cases for last week hit 70,000.

Against this worrying background, the EIA also reported a surprising inventory decline in gasoline inventories for the reporting period. At 900,000 barrels, the decline compared with an increase of 1.9 million barrels for the prior week.

Gasoline production last week averaged 9.1 million bpd, which compared with 8.9 million bpd a week earlier.

Distillate fuel inventories shed 4.5 million barrels in the week to October 23. This compares with a draw of 3.8 million barrels for the previous week. That draw followed an even heftier one for the first week of October in a rare good sign about distillate fuels.

Distillate fuel production last week averaged 4.1 million bpd, which was almost unchanged on the previous week.

Prices have been on the decline this week, pressured by the combined weight of a grim demand outlook and, yesterday, by the unexpectedly large oil inventory build reported by the American Petroleum Institute.

Some good news came from OPEC+, which is reportedly mulling over a delay in the next relaxation of production cuts, but at the same time, Libya said it plans to boost production to 1 million bpd, which largely offset the positive effect of the OPEC+ news.

At the time of writing, Brent crude traded at $39.11 a barrel, with West Texas Intermediate at $37.28 a barrel, both down by over 5 percent from opening.

By Irina Slav for Oilprice.com

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