Oil prices tumbled around 7% on Thursday, fueled by renewed concerns about demand destruction as new cases of coronavirus tick up globally, while the United States saw another large build in crude inventories.
U.S. coronavirus cases surpassed 2 million on Wednesday, according to a Reuters tally, and new infections are rising slightly after five weeks of declines. The U.S. Federal Reserve has expressed concern that consumers will continue to restrict activity to avoid becoming infected, limiting demand.
“The market is pricing in the possibility that we’ll have to slow down a little and that won’t bode well for energy demand going forward,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Brent crude LCOc1 futures fell $2.80, or 6.7%, to $38.93 a barrel by 10:49 a.m. EDT (1449 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 fell $2.98, or 7.5%, to $36.62 a barrel. Brent and WTI were set for their worst daily drops since April 21 and 27, respectively.
The Fed said U.S. unemployment was set to reach 9.3% at the end of 2020 and it would take years to fall back, while interest rates were expected to stay near zero at least through next year.
On the supply side, U.S. crude inventories rose unexpectedly by 5.7 million barrels last week to a record high at 538.1 million barrels, government data showed on Wednesday.
It also showed U.S. gasoline stockpiles grew more than expected to 258.7 million barrels. Distillate inventories, which include diesel and heating oil, rose by 1.6 million barrels, although the increase was smaller than in previous weeks.
Reuters
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