Oil prices fell on Wednesday after a bigger-than-expected build in U.S. crude stockpiles stoked fears for weak fuel demand and a potential supply glut, but hopes that OPEC and its allies will postpone a planned January increase to oil output braked losses.
Brent crude futures for January dropped 14 cents, or 0.3%, to $43.61 a barrel by 0142 GMT having lost 0.2% on Tuesday. U.S. West Texas Intermediate crude for December slid 25 cents, or 0.6%, to $41.18 a barrel, reversing a 0.2% gain on Tuesday.
The American Petroleum Institute (API) said on Tuesday that U.S. crude inventories rose by 4.2 million barrels last week, well above analysts' expectations in a Reuters poll for a build of 1.7 million barrels.
"A higher build in U.S. crude stockpiles prompted selling as it fanned fears of slow recovery in fuel demand," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
"Still, hopes that OPEC+ will keep existing cuts further into 2021, or even increase the cuts, underpinned prices," he said. Kikukawa predicted WTI will stay boxed into a range of $39 and $44 a barrel until a full meeting of the Organization of the Petroleum Exporting Countries (OPEC) on Nov. 30.
To tackle weaker energy demand amid a new wave of the COVID-19 pandemic, Saudi Arabia called on fellow members of the OPEC+ grouping - OPEC and other producers including Russia - to be flexible in responding to oil market needs as it builds the case for a tighter production policy in 2021.
OPEC+ held a ministerial committee meeting on Tuesday that made no formal recommendation.
OPEC+ members are leaning towards delaying a previously agreed plan to boost output by 2 million barrels per day (bpd), or 2% of global demand, in January in an effort to support the market, sources told Reuters early this week.
Supporting the case for a tighter supply policy next year, OPEC and its allies have revised oil demand scenarios for 2021 with demand seen weaker than previously anticipated, a confidential document seen by Reuters shows.