Oil falls over 1% on oversupply fears after build in US crude stocks

Oil prices slid more than one per cent on Wednesday, paring the previous day's gains, as a jump in US crude inventories and surging Covid-19 cases raised fears of an oversupply of oil and weak fuel demand.

In early Asia, Brent crude was down 61 cents, or 1.5 per cent, at $40.59 a barrel by 0033 GMT, having climbed nearly 2 per cent the previous day. US oil was down 66 cents, or 1.7 per cent, at $38.91 a barrel, after gaining 2.6 per cent on Tuesday.

US crude oil and gasoline stocks rose last week, data from industry group the American Petroleum Institute showed, with crude inventories rising by 4.6 million barrels to about 495.2 million barrels, against analysts' expectations in a Reuters poll for a build of 1.2 million barrels.

"The higher-than-expected build in US crude stocks prompted fresh selling while concerns over supply disruption from Hurricane Zeta have receded," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Energy firms and ports along the US Gulf Coast prepared on Tuesday for another test as Zeta, the 11th hurricane of the season, entered the Gulf of Mexico.

"Rising Covid-19 cases with the lack of a US coronavirus fiscal relief package also dented investors' risk appetite," Kikukawa said, predicting that the gloomy sentiment will keep prices under pressure over the coming day.

Infections are surging again in the United States, with nearly half a million people having contracted the coronavirus in the last seven days. European governments, meanwhile, prepared to introduce new restrictions to keep cases under control.

President Donald Trump acknowledged on Tuesday that a coronavirus economic relief deal would likely come after the November 3 election, with the White House unable to bridge differences with fellow Republicans in the US Senate as well as congressional Democrats.

Adding to pressure, Libya's production should rebound to 1 million bpd in coming weeks, complicating efforts by other OPEC members and allies to restrict output.