Oil hovered around $38 a barrel after U.S. government data showed crude inventories rose to a record high, underscoring the market’s patchy road to rebalancing.
Futures dropped as much as 3.1% in New York. American crude stockpiles rose to 538.1 million barrels last week, the highest level in data going back to 1982, according to the U.S. Energy Information Administration. Inventories at a key European hub also jumped last week, to a two-year high, Genscape Inc. reported.
“Demand isn’t coming back fast enough, and supply is coming down more slowly than the market needs,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle. “We’ll resolve that through time and price.”
Oil’s recovery from the virus-driven demand crash and swollen stockpiles remains uneven. Consumption is showing signs of uptick in India, where Indian Oil Corp. is boosting processing at its refineries this month. Still, the OECD is forecasting a sharp contraction in the global economy this year that could get worse if there’s a second wave of virus infections.
The weakness in crude prices has been accompanied by a softer market structure in recent days. Brent futures for August briefly widened to their biggest discount to September this month on Wednesday. Similarly, key swaps that help price North Sea crude have softened so far this week, according to data from brokerage Eagle Commodities.
Meanwhile, the chaos engulfing OPEC member Libya continued, with the Sharara and El-Feel fields stopping production after brief restarts. Armed groups have forced halts at both fields, just days after the nation’s oil industry was showing signs of restarting.
This article was originally posted on finance.yahoo.com/news/.