Oil prices fell on Wednesday on concerns about a possible second wave of coronavirus cases in countries easing lockdowns, which could prompt renewed movement restrictions, while industry data showed United States crude inventories are still rising.
The concerns overshadowed a further call by Saudi Arabia for larger production cuts to balance the market following a virus-induced demand slump, after the Organization of the Petroleum Export Countries’ (OPEC) biggest producer said earlier this week it planned to cut output again.
Brent crude dropped 40 cents, or 1.3 percent, to $29.58 per barrel by 06:58 GMT, having risen 1.2 percent on Tuesday.
West Texas Intermediate crude futures fell 10 cents, or 0.4 percent, to $25.68 a barrel, after rising 6.8 percent in the previous session.
“Oil prices are being undercut by fears that a resurgence of the coronavirus may prompt countries to keep lockdowns in place for longer, hurting global economic activity and energy demand,” said Avtar Sandu, manager, commodities at Phillip Futures in Singapore.
Share markets were also under pressure with the pan-European STOXX 600 index down by 1.1 percent by 0710 GMT. Stocks in Asia were mixed, with losses in Hong Kong and Japan but gains in South Korea and India.
US infectious diseases expert Anthony Fauci on Tuesday told Congress that easing coronavirus lockdowns may set off new outbreaks of the illness, which has killed 80,000 Americans and badly damaged the world’s biggest economy and oil consumer.
New outbreaks have been reported in South Korea and in China, where the health crisis started before spreading around the world, prompting governments to lock down billions of people, devastating economies and demand for oil.
The northeastern Chinese city of Jilin imposed travel restrictions on Wednesday, closed off residential areas and banned gatherings after several coronavirus cases were confirmed there.
On the supply side, Saudi Arabia’s cabinet has urged OPEC+ countries to reduce oil output further to restore balance in global crude markets, the country’s state news agency reported early on Wednesday.
Kuwait Petroleum Corp (KPC) will export less crude oil in June by requiring customers to cut 5 percent from the volume of their cargoes in line with the so-called operational tolerance clause in their contracts, two sources with knowledge of the matter told Reuters on Wednesday.
On Monday, Saudi Arabia said it would add to planned cuts by reducing production by a further 1 million barrels per day (bpd) next month, bringing output down to 7.5 million bpd.
OPEC and other producers such as Russia – a group known as OPEC+ – agreed to cut output by 9.7 million barrels per day (bpd) in May and June, a record reduction, in response to a 30 percent fall in global fuel demand.
In the US, inventories of crude oil rose by 7.6 million barrels last week to 526.2 million barrels, against analysts’ expectations for an increase of 4.1 million barrels, the American Petroleum Institute (API) said on Tuesday.
Still, stocks of crude at the Cushing, Oklahoma, delivery hub fell by 2.3 million barrels, API said, which, if confirmed by official data, would be the first drawdown since February, according to ING Economics.
“Concerns over hitting storage capacity have eased, as we see demand gradually recovering, along with supply cuts hitting the market,” ING said in a note, pointing to the decline in Cushing stocks.
Official storage data from the US Energy Information Administration is due later on Wednesday.
Vandana Hari, founder and CEO of energy research firm Vanda Insights, said in a note that both the supply and demand pictures suggest that oil prices are at a turning point, but that any future gains are likely to be slow.
“The market appears sharply divided between participants confident that we are past the inflection point and ones that regard the rebound as irrational exuberance,” Hari said in the note distributed by the Smartkarma platform and seen by Al Jazeera.