TOKYO (Reuters) – Oil prices fell on Friday, extending big losses from overnight as U.S. coronavirus cases surged this week and raised the prospect of a second wave of the COVID-19 outbreak hitting demand in the world’s top consumer of crude and fuel.
Brent was down $1.34, or 3.5%, at $37.21 a barrel by 0701 GMT, having dropped nearly 8% in the previous session. West Texas Intermediate was down $1.37 cents, or 3.8%, at $34.97 a barrel, after slumping more than 8% on Thursday.
The reality that the coronavirus pandemic may be far from over has brought the rally that raised oil off April lows to a shuddering halt, with infections in the United States alone passing 2 million.
The oil benchmarks are heading for their first weekly declines in seven, with Brent and U.S. crude both down more than around 12% as rising stockpiles also drag on prices.
“U.S. inventories are up this week, against many analysts expectations (while) COVID-19 cases are also showing signs of a second wave in the U.S. and elsewhere,” said Greg Priddy, director for global energy and the Middle East, at Stratfor.
Producers from the United States, as well as from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, have been cutting supply, some by record amounts. OPEC+ cut oil supplies by 9.7 million barrels per day (bpd), about 10% of pre-pandemic demand, and agreed last weekend to extend the reduction.
“It is now clear that the deepest OPEC+ cuts, 9.7 million bpd, will end at the end of July, ratcheting down to 7.7 million bpd,” said Priddy.
U.S. crude and gasoline stockpiles grew last week, according to government data. U.S. crude oil inventories rose to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.
That gave rise to worries about a continuing supply-demand imbalance, as states including Texas and Arizona are seeing their coronavirus infections jump and are struggling to cope with a growing number of patients filling hospital beds.
In Houston, Lina Hidalgo, senior official for the county that includes the city at the heart of the U.S. oil industry, said “we may be approaching the precipice of a disaster”.
Reporting by Aaron Sheldrick; Editing by Kenneth Maxwell and Tom Hogue