Oil slipped below $40 a barrel on Thursday after a more than 5 percent fall the previous session, as record-high US crude inventories and a resurgence in coronavirus cases cast doubt on a recovery in fuel demand.
US crude stocks rose 1.4 million barrels, the Energy Information Administration said on Wednesday. This hit crude prices, although other details the EIA reported such as a fall in gasoline stocks as demand rose, lent limited support.
For more coronavirus news, visit our dedicated page.
“The report was another nail in the bulls’coffin although it was not as depressing as the price fall suggests,” said Tamas Varga of oil broker PVM. “On the positive side, oil consumption is healthy.”
Brent crude fell 54 cents, or 1.3 percent, to $39.77 at 1150 GMT, and traded as low as $39.47. The global benchmark dropped 5.4 percent on Wednesday. US West Texas Intermediate (WTI) crude declined 56 cents, or 1.5 percent, to $37.45.
Read more: Coronavirus: Fourth largest US city may exceed ICU capacity in two weeks
Oil and equities were also pressured by a rise in coronavirus cases. New infections have surged in some US states and Australia posted its biggest daily rise in cases in two months.
“Demand, which was expected to rise as COVID-19 subsides, is again under threat with infections rising in key markets,” said Bjornar Tonhaugen of Rystad Energy.
“All eyes are on how governments will react to the new surge of the pandemic.”
Also weighing on demand prospects was the International Monetary Fund’s prediction on Wednesday of a deeper global recession than previously thought.
A record supply cut by the Organization of the Petroleum Exporting Countries and allies has supported the oil market, which is much stronger compared to April, when Brent hit a 21-year low below $16 a barrel and US crude went negative.
Investors are waiting to see if the producers, known as OPEC+, extend their record cut beyond July.
- US sanctions five Iranian ship captains who delivered oil to Venezuela: Pompeo
- Libya's oil and the war to control it since dictator Gaddafi’s demise explained
- Oil prices up after Trump assurance that China trade deal ‘fully intact’
- Coronavirus: Oil at $42 as prospects for better OPEC+ deal compliance buoy market
- Coronavirus: OPEC says oil, fuel demand will remain ‘under pressure’ for rest of 2020