Oil slips on weaker demand outlook after U.S. gasoline stocks build

By Sonali Paul
MELBOURNE, Oct 22 (Reuters) - Oil prices dropped in early
trade on Thursday, adding to heavy losses overnight, after a
build in U.S. gasoline inventories pointed to a deteriorating
outlook for fuel demand as coronavirus cases soar in North
America and Europe.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
27 cents, or 0.7%, to $39.76 a barrel at 0127 GMT, after
skidding 4% on Wednesday.
Brent crude LCOc1 futures retreated 21 cents, or 0.5%, to
$41.52 a barrel after sliding 3.3% on Wednesday.
U.S. gasoline stocks USOILG=ECI rose by 1.9 million
barrels in the week to Oct. 16, the Energy Information
Administration (EIA) said, compared with expectations for a 1.8
million-barrel drop. EIA/S
Overall product supplied, a proxy for demand, averaged 18.3
million barrels per day in the four weeks to Oct. 16, the EIA
said - down 13% from the same period a year earlier.
"The latest EIA report showed an unexpected increase in
gasoline inventories, which came at the same time as reduced
gasoline output because of refinery outages due to Hurricane
Delta. So the implication is gasoline demand is pretty soft,"
said Lachlan Shaw, head of commodity research at National
Australia Bank.
With new daily COVID-19 infections hitting records in
several U.S. states and in Europe, new lockdowns and China's
clampdown on outbound travel to help stem the spread of the
disease bode ill for fuel demand. Worsening the outlook, hopes that U.S. lawmakers would reach
an agreement with the White House on an economic stimulus
package dimmed late on Wednesday after President Donald Trump
accused Democrats of holding up a compromise deal. "The resurgence in coronavirus cases is seeing the U.S.
motorist increasingly putting the brakes on. This makes the
negotiations on a U.S. stimulus package even more important,"
ANZ Research said in a note.
NAB's Shaw said even if a COVID-19 relief package was
approved, it would likely give oil prices only a temporary lift.
"It might improve the demand tone for a week or two, but
with the coronavirus spread accelerating there are headwinds
there," he said.