Oil prices settled lower overnight on fuel demand worries due to an uptick in coronavirus cases, with emerging hotspots in China and the United States, and as US crude stocks grew again, taking commercial inventories to another all-time high.
Brent crude settled down 25 US cents, or 0.6 per cent, at $US40.71 a barrel. US West Texas Intermediate (WTI) fell 42 US cents, or 1.1 per cent, to $US37.96 a barrel.
US crude inventories rose to a record high last week for a second straight week, reaching more than 539 million barrels. Conversely, distillate stockpiles fell following weeks of significant builds, government data showed.
The World Health Organisation said it would update its guidelines after results showed the corticosteroid medication dexamethasone cut death rates among severely ill COVID-19 patients.
However, the virus is spreading in parts of the United States, while flights were cancelled and schools were shut in Beijing to head off a new virus outbreak in the Chinese capital.
“Today’s slide seems to be related to the build we saw in crude stockpiles and ongoing worries about demand due to the coronavirus,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “The market is trying to find whether it has enough strength to resume its rally that took us above three-month highs.”
US fuel demand, as measured by product supplied, is down 20 per cent over the past four weeks from a year earlier, the government said.
US crude production fell by 600,000 barrels per day last week to 10.5 million bpd, its lowest since March 2018. Some of that was due to Storm Cristobal, which shut more than one-third of US offshore output.
However, US shale producers were expected to restore roughly half a million bpd of crude output by the end of June, according to crude buyers and analysts.