Venezuela oil tankers. Picture: BLOOMBERG
Venezuela oil tankers. Picture: BLOOMBERG

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

US crude stocks rose 1.4-million barrels to a record high, the Energy Information Administration said on Wednesday. This hit crude prices, as other details the EIA reported such as fall in gasoline stockpiles, lent limited support.

“The report was another nail in the bulls’ coffin although it was not as depressing as the price fall suggests,” said Tamas Varga of oil broker PVM. “On the positive side, oil consumption is healthy.”

Brent crude fell 19 cents, or 0.5%, to $40.12 at 8.35am GMT, and traded as low as $39.47. The global benchmark dropped 5.4% on Wednesday. US West Texas Intermediate (WTI) crude fell 49c, or 1.3%, to $37.52.

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

“The increasing coronavirus case count in key US states has markets, oil as well as equities, worried,” said analysts at JBC Energy.

A resurgence of the novel coronavirus would weigh on oil demand, which has been recovering as some places lifted lockdowns, and economic growth. The International Monetary Fund on Wednesday predicted a deeper global recession than previously thought, which is also weighing on sentiment.

A record supply cut by the Opec 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 US crude went negative.

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

Reuters