Oil. Picture: REUTERS
Oil. Picture: REUTERS

Melbourne/Singapore — Oil prices slipped on Thursday, extending losses of more than 5% in the previous session, weighed down by record high US crude inventories and worries that a rapid resurgence in Covid-19 cases could choke a revival in fuel demand.

US West Texas Intermediate (WTI) crude futures fell 26 cents, or 0.7%, to $37.75 a barrel at 2.45am GMT on Thursday, after dropping $2.36 on Wednesday.

Brent crude futures fell 30 cents, or 0.7%, to $40.01 a barrel after falling $2.32 on Wednesday. A day earlier, the benchmark contract hit its highest price since early March, just before pandemic lockdowns and a Saudi-Russian price war slammed markets.

Wednesday’s sell-off came after US government data showed crude stockpiles rose by 1.4-million barrels, driving inventories to a record high for a third straight week last week.

Analysts, however, said that was mostly due to a flotilla of Saudi cargoes booked by US refiners when prices slumped in March. Those shipments are due to ease soon.

Worries about a second wave of Covid-19 cases in several US states, where lockdowns had eased, and a rapid spread of infections in South America and South Asia are expected to keep a lid on fuel demand, market watchers said.

“The latest trends there are not encouraging,” said National Australia Bank’s head of commodity research, Lachlan Shaw.

The fear is that even if lockdowns are eased, people will stay at home because of the perceived health risks.

Stephen Innes, market strategist at AxiCorp, said mobility data from Google showed driving in Texas, Florida and to a certain extent California was flatlining.

In another reminder of fuel demand woes, Australia’s flagship airline, Qantas Airways, said on Thursday it expected little revival in international travel until at least July 2021, as it slashed a fifth of its workforce and grounded 100 planes.

“It highlights the reality that we’re talking years before international aviation recovers — probably three to four years,” Shaw said.

Reuters