By Geoffrey Smith
Investing.com -- Crude oil prices fell but recovered on Tuesday after weak quarterly earnings from the U.S. banking sector cast fresh doubt on the health of the world's largest economy and the outlook for fuel demand.
By 10:15 AM ET (1415 GMT), the benchmark U.S. crude marker was effectively unchanged at $40.11 a barrel, while the international benchmark Brent was up less than 0.3% at $42.83 a barrel.
That was mainly the result of a combined $28 billion in provisions against possible and actual credit losses booked by JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) in the second quarter. Much of the corporate credit losses, of course, are tied to the U.S. oil and gas sector, which has seen companies such as Chesapeake Energy (NYSE:CHK) and Whiting Petroleum (NYSE:WLL) collapse under huge debts in the last three months.
The signs of weakness from the real economy put some added spice into the release of the American Petroleum Institute's weekly estimate of U.S. crude stocks, which is due at 4:30 PM ET (2030 GMT). Inventories have risen in five of the last seven weeks, with the only significant decline coming in the week before the July 4th holiday, a time of peak demand. The market is looking for a draw of 2.275 million barrels from the government's weekly data, which are due on Wednesday.
The market took little direction from reports suggesting that OPEC and its allies had over-fulfilled their commitments to keep crude off world markets in June, even though it all but made certain that the group will stick to a phased and limited restoration of supplies through the rest of the year, starting with an additional 2 million barrels a day from August.
In its monthly report on the oil market, OPEC had earlier made only marginal changes to its forecasts for demand this year, but had flagged expectations of a robust rebound next year. The group expects to raise its output back to an average of 29 million barrels a day in 2021, from less than 23 million barrels a day last month.