By Saket Sundria and Alex Longley

Jul 7, 2020

(Bloomberg)Oil pared losses to trade near $40 a barrel before U.S. government data that’s forecast to show gasoline stockpiles increased.U.S. gasoline supplies expanded by 1 million barrels last week, according to a Bloomberg survey before industry figures expected later Tuesday. That was offset by the dollar easing some of its earlier gains. Crude has struggled to break far beyond $41 a barrel since early June, with volatility hitting its lowest level in four months, a stark contrast from the wild fluctuations seen in prices earlier this year.

WTI is trapped below the $41-a-barrel level

The cap to any further gains in prices comes as rising coronavirus cases have forced major fuel-consuming states in America’s south to reimpose measures such as shutting bars and banning indoor dining, with lockdowns also re-emerging in other corners of the globe. Prices have been sandwiched into a range by unprecedented supply cuts from OPEC and its allies, though the measures are set to wind down next month and producers are yet to decide on whether to extend the curbs.

“With rising coronavirus cases reported from all over the world and with global oil production expected to rise soon one cannot help but think the medium-term peak is not far away,” said PVM Oil Associates analyst Tamas Varga.

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Prices
West Texas Intermediate for August delivery fell 0.8% to $40.30 a barrel as of 8:34 a.m. New York time Brent for September settlement dropped 0.6% to $42.83 a barrel

Consumption of gasoline in America fell by nearly 420,000 barrels a day over the last week, RBC analysts including Mike Tran said. Nationwide stockpiles of the fuel rose for a second week, according to the Bloomberg survey, which would see inventories at the highest level in a month. Supplies of distillates, a category that includes diesel, increased by 500,000 barrels. Official government data is due Wednesday.

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It “certainly feels as if there is a risk that the demand recovery will be flatter,” said Paul Horsnell, head of commodities research at Standard Chartered Plc. “The accumulated inventory excess is going to hang over things for a while.”