Oil Holds Losses as Report Points to Expanding U.S. Stockpiles

Oil held losses near $64 a barrel in early Asian trading after an industry report pointed to a third weekly increase in U.S. crude stockpiles.

Futures in New York have lost more than 3% over the past two sessions in a volatile start to the week that included a brief surge to an October 2018 high. The American Petroleum Institute reported crude inventories expanded by almost 13 million barrels last week, according to people familiar with the data.

While prices have dipped this week, crude is expected to resume its upward trend, which may encourage more activity from U.S. drillers. Production across American shale patches next year is expected to climb to the highest since 2019, according to a government report.

Oil is still up 32% this year as the market tightens amid output cuts from Saudi Arabia and OPEC+, and as the demand outlook improves with the rollout of Covid-19 vaccines. Elevated tensions in the Middle East after a key crude export terminal in the kingdom was attacked Sunday may also be aiding prices.

While the API data was bearish on crude stockpiles, it signaled healthy draws in fuel supplies. Gasoline inventories dropped by 8.5 million barrels last week, while distillates — a category that includes diesel — fell by 4.8 million barrels.