(Bloomberg) -- Oil held a loss -- but remained near a five-month high -- as an industry report pointing to another drop in American crude stockpiles was overshadowed by the coronavirus and a lack of progress on U.S. stimulus talks.
Futures in New York edged higher toward $42 a barrel after losing 0.8% Tuesday. The American Petroleum Institute reported inventories fell by 4.01 million barrels last week, according to people familiar with the data. That would be the third straight weekly drop if confirmed by government figures.
Virus infections breached 20 million globally, Florida reported another day of record deaths and New Zealand’s largest city went back into lockdown after a fresh outbreak. The S&P 500 stock benchmark fell for the first time in eight sessions on Tuesday, with some traders citing comments from Senate Majority Leader Mitch McConnell saying stimulus talks are at a stalemate as a catalyst.
Oil is struggling to climb above its 200-day moving average as ongoing uncertainty over the trajectory of the demand recovery from the pandemic keeps gains in check and OPEC+ returns some barrels to the market. Drilling activity in the U.S., the world’s biggest producer, isn’t likely to be rebound until next year unless prices move back toward $50 a barrel in the next few weeks, Rystad Energy said in a note.
U.S. shale producers are saving about 20% on well costs compared with last year, Macquarie Group (OTC:MQBKY) Ltd. said. That could be bearish for oil if it means they have found a way to keep producing below $40 a barrel, it said in a note.
American crude oil production would be 11.26 million barrels a day this year, the Energy Information Administration forecast, down from July’s 11.63 million estimate. Gasoline and distillates stockpiles also fell last week, the API said, while inventories at the Cushing storage hub rose by 1.1 million barrels.
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