Oil prices fell on Wednesday, reversing the previous session's surge, as record-high inventories and worries about a second wave of the coronavirus pandemic outweighed support from a gradual reopening of global economies.
Brent crude were down 43 cents, or one percent, to $42.20 a barrel by 1020 GMT a day after hitting its highest level since a price plunge began in March. The benchmark crude has climbed from below $16 in April but remains a third lower than its level at the end of 2019.
U.S. West Texas Intermediate (WTI) crude fell 56 cents, or 1.4 percent, to $39.81 a barrel. A rising number of coronavirus cases in the United States, China, Latin America and India has unnerved investors. "These are all important oil demand centres. A second wave of infections and lockdowns will derail the global economic recovery and with it, oil demand and prices," said Stephen Brennock of broker PVM.
Oil Prices Fall
Storage facilities around the world are almost full and if a second of wave of the pandemic hits demand, they will struggle to cope with the unused oil, analysts say. Upbeat European manufacturing surveys offered some support, but European Central Bank chief economist Philip Lane said recent solid data was not necessarily a good guide and the euro zone economy would need a long time to recover.
Further pressure on prices, especially on WTI, came from a bigger-than-expected rise in U.S. crude inventories, according to industry group the American Petroleum Institute (API). However, U.S. gasoline and distillate inventories fell, suggesting consumption was picking up as lockdowns were eased.
U.S. government data will be released on Wednesday. Global oil demand has started to recover as economies emerge from lockdown, while the Organization of the Petroleum Exporting Countries (OPEC) and allied producers, a grouping known as OPEC+, have slashed output and U.S. shale producers have shut wells.
But global inventories are still bulging. India's oil imports in May hit the lowest since October 2011 as refiners with brimming stores of crude cut purchases. China, the world's top crude importer, is also expected to slow crude imports in the third quarter, after record purchases in recent months.