UPDATE 7-Oil prices fall as inventory report reflects demand weakness

* U.S. gasoline inventories fall -EIA
* Fuel demand worry grows; global COVID-19 cases pass 40 mln
* Hopes for U.S. deal on pandemic aid offer some support

(New throughout, updates prices, market activity and comments
to settlement)
By Laura Sanicola
NEW YORK, Oct 21 (Reuters) - Oil prices settled lower on
Wednesday after U.S. inventory figures showed demand weakening
for refined products as global COVID-19 cases spiked.
Brent crude futures LCOc1 settled at $41.73 a barrel, down
$1.43, or 3.3%, as of 12:48 p.m. ET. U.S. West Texas
Intermediate (WTI) crude CLc1 futures dropped $1.67, or 4%, to
$40.03. Both benchmarks rose in the previous session.
Crude inventories fell by 1 million barrels in the week to
Oct. 16 to 488.1 million barrels, while gasoline stocks rose in
another weak showing for fuel demand. Overall product supplied, a proxy for demand, remained down
13% on the year and over the past four weeks when compared with
the year-ago period.
"The market is seriously grappling with demand in the wake
of a continued rise in COVID-19 cases," said Tony Headrick,
energy markets analyst at CHS Hedging.
Adding to pressure, worldwide COVID-19 cases crossed 40
million on Tuesday, with some parts of Europe imposing renewed
lockdown measures. "Brent is particularly exposed to European regions which are
undergoing new lockdowns," Headrick said.
On Tuesday, Russia's energy minister said it was too early
to discuss the future of global oil production curbs beyond
December, less than a week after saying plans to scale back
output restrictions should proceed. Earlier this year the Organization of the Petroleum
Exporting Countries (OPEC) and allies including Russia -
together known as OPEC+ - agreed to trim production cuts in
January from a current 7.7 million barrels per day (bpd) to
roughly 5.7 million bpd.
At the same time, OPEC member Libya, which is exempt from
the cuts, is also ramping up production after armed conflict
shut almost all its output in January. Production has recovered
to about 500,000 bpd with Tripoli expecting that figure to
double by year-end. The battle over a hefty, new U.S. coronavirus aid bill was
set to spill into Wednesday as the White House and Democrats try
to strike a deal before the Nov. 3 presidential and
congressional elections, now with the encouragement of President
Donald Trump.