Picture: REUTERS/DARRIN ZAMMIT LUPI
Picture: REUTERS/DARRIN ZAMMIT LUPI

Tokyo — Oil futures dropped on Wednesday, extending losses from the previous day, after US crude stockpiles grew more than expected, adding to the worry about oversupply.

Brent crude was down 29c, or 0.7%, at $42.34 a barrel by 3.35am GMT, while US West Texas Intermediate (WTI) crude futures fell 35c, or 0.9%, to $40.02 a barrel.

US crude inventories rose by a much bigger than expected 1.7-million barrels last week, according to industry group the American Petroleum Institute (API), well ahead of analysts’ expectations for a 300,000-barrel build.

However, US petrol and distillate inventories fell, the data showed, feeding optimism that fuel consumption is picking up as some economies ease lockdowns imposed to contain the coronavirus pandemic.

US government data will be released on Wednesday.

“Some investors took profits after the recent rally as they saw higher US crude stockpiles,” said Chiyoki Chen, chief analyst at Sunward Trading.

On Tuesday, both Brent and WTI contracts traded at their highest levels since prices collapsed in early March.

Global oil consumption has started to recover as economies emerge from lockdown, while Opec and allied producers — a grouping known as Opec-plus — have slashed output and US shale producers have shut in wells.

Still, the market remains concerned about a rising number of coronavirus cases in the US and elsewhere, said Kazuhiko Saito, chief analyst at Fujitomi.

New cases of Covid-19 rose 25% in the US in the week ended June 21 and the death toll in Latin America passed 100,000 on Tuesday, according to a Reuters analysis and tally.

China, the world’s top crude importer, is also expected to slow crude imports in the third quarter, after record purchases in recent months, as higher oil prices hurt demand and refiners worry about a second virus outbreak.

“We expect Brent to be traded between $35-45 a barrel for the next week as concern over a second wave of the coronavirus pandemic will limit gains, while reduced supply from Opec-plus will lend support,” Chen said.

Reuters