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Oil prices slip as US inventory build-up stokes fears of supply glut

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Crude inventories rose by 584,000 barrels in the week to Oct 16 to 490.6 million barrels, data from industry group API showed.

Tokyo

OIL prices eased on Wednesday after a surprise build-up in US crude stockpiles stoked concerns about a global supply glut and a spike in global Covid-19 cases fuelled fears of a stalled oil demand recovery.

Brent crude futures for December delivery were at US$42.66 a barrel, down 50 cents, or 1.16 per cent, as of 1027 GMT, while December US West Texas Intermediate (WTI) crude futures slipped 56 cents, or 1.34 per cent, to US$41.14.

Both benchmarks rose in the previous session.

"Lower European equity markets and a surprise crude build are in my view the factors weighing on oil prices today. The market is probably also wanting to see if the EIA confirms the API (American Petroleum Institute) report later today and any news on a fiscal package in the US," Giovanni Staunovo, analyst at UBS Bank, said.

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Crude inventories rose by 584,000 barrels in the week to Oct 16 to 490.6 million barrels, data from industry group the API showed, compared with analysts' expectations in a Reuters poll for a draw of one million barrels.

Data from the US Energy Information Administration (EIA) is due out later on Wednesday.

Adding to pressure, worldwide Covid-19 cases crossed 40 million on Tuesday, with some parts of Europe imposing renewed lockdown measures.

"A US inventory build-up, together with the recent resurgence of the Covid-19 cases worldwide, prompted investors to make position adjustments," said Chiyoki Chen, chief analyst at commodity broker Sunward Trading.

On the supply side, Russia's energy minister said on Tuesday it was too early to discuss the future of global oil production curbs beyond December, less than a week after saying plans to scale back existing output restrictions should proceed.

Earlier this year the Organization of the Petroleum Exporting Countries (Opec) and allies including Russia -- together known as Opec+ - agreed to trim production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd.

At the same time, Opec member Libya, which is exempt from the cuts, is also ramping up production after armed conflict shut almost all of the country's output in January, pumping more oil into an oversupplied market.

The battle over a hefty, new US coronavirus aid bill was set to spill into Wednesday as the White House and Democrats try to strike a deal before the Nov 3 presidential and congressional elections, now with the encouragement of President Donald Trump.

"Hopes for economic stimulus in the United States and other countries to combat a pandemic-led slump in consumption are expected to cap losses, but planned reduction in output cuts by Opec+ will also limit any future gains," said Satoru Yoshida, a commodity analyst with Rakuten Securities, predicting an upside and downside potential of US$5 a barrel through the year. REUTERS

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