By Sonali Paul, MELBOURNE Australia
Oil prices fell more than 2% on Thursday on worries about slow demand growth with coronavirus cases rising, U.S. crude stockpiles hitting an all-time high and the U.S. Federal Reserve projecting recovery from the pandemic would take years.
U.S. West Texas Intermediate (WTI)
crude CLc1 futures erased gains from Wednesday, falling as low as $38.42 a
barrel. The benchmark contract was down 2.5%, or 99 cents, at $38.61 at 0211
GMT.
Brent crude LCOc1 futures fell 2.2%,
or 92 cents, to $40.81 a barrel, also giving up gains from Wednesday.
U.S. crude inventories rose
unexpectedly by 5.7 million barrels in the week to June 5 to 538.1 million
barrels - a record - as imports were boosted by the arrival of supplies bought
by refiners when Saudi Arabia flooded the market in March and April, data from
the Energy Information Administration showed.
At the same time, gasoline stockpiles
grew more than expected to 258.7 million barrels. Distillate stockpiles, which
include diesel and heating oil, rose by 1.6 million barrels, but the increase
was smaller than in previous weeks.
The market took a negative view on
the stock build, even though there were signs of improving gasoline demand in
the data, too, said Commonwealth Bank commodities analyst Vivek Dhar.
“Most of the (price) gains have come
from when strict lockdowns were lifted. Coming back to where it was pre-COVID -
that will take some time,” Dhar said.
“The key for markets to feel like the
worst is over is: when will stockpiles peak globally. That’s what the market is
paying attention to.”
Adding to the negative sentiment, the
U.S. Federal Reserve said the world’s largest economy would shrink 6.5% this
year and the unemployment rate would be at 9.3% at the end of 2020 in its first
projections of the pandemic era.
“Short-term and fast money traders
are very much inclined to sell outright or to take profits on any hint of
bearish data,” said Stephen Innes, chief global market strategist at Axicorp.
In a further sign that recovery will continued to be overshadowed by the coronavirus, total U.S. cases topped 2 million on Wednesday, with new infections rising slightly after five weeks of declines, according to a Reuters analysis.
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