Oil fell in New York after an industry report signalled another increase in U.S. crude stockpiles, while the spread of the coronavirus continued to cloud prospects for an economic recovery.
Futures dropped 1.6 per cent, extending Tuesday’s decline after settling at the highest since early March on Monday. The American Petroleum Institute reported that inventories rose by 1.75 million barrels last week, according to people familiar with the data. That would be a third weekly gain if confirmed by government figures on Wednesday. The dollar also climbed, adding to pressure on prices.
Oil has rallied since plummeting below zero in April as producers slashed output and countries eased lockdown restrictions, boosting demand. Yet the virus threat remains acute. The U.S. government’s top infectious-disease expert, Anthony Fauci, said Tuesday he’s seeing a “disturbing surge” in new cases.
While the “focus lies on the inventory data,” there’s also persistent anxiety around the growth of the pandemic, said Hans van Cleef, senior energy economist at ABN Amro. “Hopes for a rise in demand are counterbalanced by fears regarding new COVID-19 spread.”
- West Texas Intermediate for August fell 65 cents to $39.72 a barrel as of 10:35 a.m. London time
- Brent for August slid 1.2 per cent to $42.12 a barrel
- The prompt timespread for Brent flipped back to contango on Tuesday after three days in backwardation. The strength in key swaps that price North Sea oil has also subsided in recent days
Newly diagnosed virus cases and other indicators of the pandemic’s spread have soared in hot spots across the U.S., driving city and state officials to consider slowing or reversing reopening plans. Infections are growing in Texas, Florida, Arizona and in California. Yet American gasoline demand has now returned to about 80 per cent of where it was last year, according to IHS Markit.
While the API indicated a gain in nationwide crude stockpiles, it reported that supplies at Cushing, Okla., the delivery-point for U.S. futures, fell by 325,000 barrels, and gasoline inventories slid by 3.86 million barrels. A Bloomberg survey estimates the increase in U.S. crude stockpiles at 1.5 million barrels.
Anxiety over trade also weighed on the market, with the U.S. mulling new tariffs on $3.1 billion of exports from France, Germany, Spain and the U.K., adding to an arsenal of measures against the
European Union that could spiral into a wider transatlantic trade fight later this summer.
© 2020 Bloomberg L.P.