Oil slips below $40 on record U.S. inventories, COVID fears

Oil slipped below $40 a barrel on Thursday after a more than 5% fall the previous session, as record-high U.S. crude inventories and a resurgence in coronavirus cases cast doubt on a recovery in fuel demand.

U.S. 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.

Brent crude fell 54 cents, or 1.3%, to $39.77 at 1150 GMT, and traded as low as $39.47. The global benchmark dropped 5.4% on Wednesday. U.S. West Texas Intermediate (WTI) crude declined 56 cents, or 1.5%, to $37.45.

Oil and equities were also pressured by a rise in coronavirus cases. New infections have surged in some U.S. states and Australia posted its biggest daily rise in cases in two months.

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 U.S. crude went negative.

Investors are waiting to see if the producers, known as OPEC+, extend their record cut beyond July.

Oil slips below $40 on record U.S. inventories, COVID fears, Reuters, Jun 24