(Bloomberg) — Oil retreated to near $38 a barrel after a U.S. industry report signaled a surprise jump in crude inventories, underscoring the market’s patchy road to rebalancing.Futures dropped 2.4% in New York. The American Petroleum Institute reported that stockpiles expanded by 8.42 million barrels last week, according to people familiar with the data. If confirmed by government figures later on Wednesday, it would be the largest build since the end of April. Inventories at a key European hub jumped to a two-year high last week, Genscape Inc. reported.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, and one that could get worse if there’s a second wave of virus infections.“Indications from the American Petroleum Institute show that stocks built quite a lot,” said Rystad Energy head of oil markets Bjornar Tonhaugen. “Shut-in production returning and a rise in Covid-19 cases scare traders – and markets.”The weakness in crude prices has also been accompanied by a softer market structure in recent days. Brent futures for August were at 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 field stopping production after armed men entered the site Monday and told employees to end activities. Though operations were briefly allowed to resume, according to people with knowledge of the situation, the group halted output again for the second time in a day, the Tripoli-based National Oil Co. said on its Facebook page.Supplies of U.S. distillates, which include diesel, rose by 4.27 million barrels last week, while stockpiles at the storage hub of Cushing, Oklahoma, fell by 2.29 million barrels, the API reported. The Energy Information Administration is expected to report nationwide crude inventories dropped by 1.85 million barrels, according to a Bloomberg survey.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
