U.S. stock markets rose, after a pullback in the previous session. Still, the three main U.S. stock indexes were also headed for a second straight weekly decline as recent economic indicators suggested a long and difficult recovery from the pandemic. “The financial markets are continuing to set the tone, including on the oil market … fears about an oversupply have added to the general feeling of uncertainty,” Commerzbank analysts said in a note. Also dampening the market mood, the U.S. Senate killed a Republican bill that would have provided around $300 billion in new coronavirus aid.
In the United States, crude stockpiles rose last week, against expectations, as refineries slowly returned to operations after production sites were shut down due to storms in the Gulf of Mexico and the wider region. U.S. crude inventories rose 2 million barrels, compared with forecasts for a 1.3 million-barrel decrease in a Reuters poll. U.S. drillers also have started to slowly add oil and gas rigs after the rig count, an early indicator of future output, hit a record low of 244 in the week to Aug. 14.
In a further bearish sign, traders were starting to book tankers again to store crude oil and diesel, amid a stalled economic recovery as the COVID-19 pandemic continues. Increasing stockpiles are likely to be a subject at a meeting on Sept. 17 of the market monitoring panel of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia. The group known as OPEC+ has been withholding supply to reduce stockpiles, but analysts say the meeting is likely to focus on compliance among members, rather than deeper cuts. Following Saudi Arabia, Kuwait also lowered its official selling price to Asia for October, to counter slower demand.
“The decline is triggered by a series of unfortunate events: a surge in COVID-19 cases worldwide, the end of the peak summer driving season, the slowdown of the Chinese crude importing machine, and major producers trimming the OSPs to Asia as refinery margins worsen,” Rystad Energy’s senior oil markets analyst Paola Rodriguez-Masiu said.
