Oil fell more than one percent to below $41 a barrel on Wednesday after a report showed a rise in crude inventories in the United States, reviving concerns about oversupply and weak demand because of the coronavirus crisis. The report from the American Petroleum Institute, an industry group, said crude stocks rose by 8.4 million barrels, rather than falling as analysts forecast. The U.S. government's official stocks figures are due out later on Wednesday.

"Indications from the American Petroleum Institute show that stocks built quite a lot," said Bjornar Tonhaugen of Rystad Energy. "What else can you do as a trader but rush to sell?" Brent crude was down 50 cents, or 1.2 percent, to $40.68 a barrel at 1325 GMT. U.S. West Texas Intermediate (WTI) also dropped 50 cents, or 1.3 percent, to $38.44.

Brent Crude Was Down 50 Cents

Oil industry
Oil industry Pixabay

Both benchmarks had hit three-month highs on Monday. Brent has more than doubled since falling to a 21-year low below $16 in April. But some analysts think the market has risen too far as the coronavirus pandemic continues. "With equity markets edging lower, and a vast amount of good news baked into oil prices at these levels, it was no surprise that the oil market's confidence wavered slightly," said Jeffrey Halley, senior market analyst at OANDA.

Official government figures on U.S. stockpiles from the Energy Information Administration are due later on Wednesday. Prices have been supported by a record oil supply cut of 9.7 million barrels per day (bpd), about 10 percent of pre-coronavirus daily demand, by the Organization of the Petroleum Exporting Countries (OPEC), Russia and others, a group known as OPEC+.

An easing of government lockdowns that sought to limit the spread of the virus has revived demand by boosting travel and economic activity, also supporting the market. OPEC+ agreed on Saturday to extend the record cut for another month until the end of July. While this helped prices, the market came under pressure after Saudi Arabia, Kuwait and the United Arab Emirates decided not to extend their extra voluntary supply reductions.