Line chart of Commercial crude inventories (million barrels) showing US oil stocks build as petrol demand slides

The recovery in the US oil industry looked on Thursday to have stalled after data showed crude stocks building for the first time in almost two months as the country’s struggles to contain coronavirus cases knocked demand for fuel.

American commercial crude inventories grew by 2m barrels — or 0.4 per cent — in the week to September 4, according to figures from the Energy Information Administration, breaking a six-week run of drawdowns. Economists polled by Reuters had anticipated a 1.3m barrel decline in stocks.

The build-up came as petrol demand dropped by almost 400,000 barrels, or 4 per cent, suggesting the ongoing rise in coronavirus cases in recent weeks has put the breaks on fuel demand, which has wavered since its mid-August peak.

“It appears, based on the data, that the volumes have stagnated now,” said Fred Rozell, president of Opis, an oil information service which tracks fuel demand. “The virus is still rampant here and people are still working from home.”

US petrol consumption collapsed in April as lockdowns and stay at home orders forced cars off the roads, but it recovered rapidly from May to July as America opened back up. That uptick now appears to have stalled.

Petrol demand peaked in mid August at 7.8m barrels a day in the week to August 15 — 15 per cent below last year’s levels — before dropping off again, according to Opis. And despite a slight uptick over the Labor Day holiday at the start of this week — traditionally the end of the US summer driving season — it now looks set to flatline for the rest of the year.

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“The thinking is that it’s sort of going to stagnate for a bit here even if there’s a vaccine that comes out,” Mr Rozell said. “The best guess is that things will very slowly creep back up.”

Many areas of the US, like many in other countries, have recorded a pick-up in coronavirus infections as restrictions are loosened. The country has confirmed more than 6.3m coronavirus cases and almost 183,000 fatalities since the pandemic began, according to Covid Tracking Project.

Oil prices slid following the EIA release before recovering a little to leave West Texas Intermediate, the US benchmark, down 0.6 per cent for the day, at around $37.80.

The data comes as further bad news for the American oil and gas sector, which continues to shed jobs in the wake of the price crash.

Job cuts in oilfield services, which account for the bulk of jobs in the sector, have now surpassed 100,000 since the beginning of the crash, according to a report released on Wednesday by the Petroleum Equipment and Services Association.

Via Financial Times