Oil prices fell more than 1% towards $40 per barrel on Wednesday after a report revealed a surge in United States’ oil storage, reigniting worries over glut and poor demand owing to the coronavirus crisis.
American Petroleum Institute, an industry group, said oil stocks upped by 8.4 million barrels, contrary to analysts’ forecast envisaging a fall.
Brent crude futures depressed 88 cents or 2.14% to $40.30 per barrel by 10:06 West Africa Time just as U.S. West Texas Intermediate (WTI) futures fell by $1.06 or 2.72% to $37.88 a barrel.
Nigeria’s Bonny Light weakened by 83 cents or 2.06% to $39.55 at the previous session.
Brent and the WTI had touched their three-month highs on Monday. Brent had exceeded a 100% growth since plumbing a 21-year low below $16 in April.
But some experts believe the market had 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.
“That was not helped by a blowout rise in U.S. API crude inventories,” said Jeffrey Halley, Senior Market Analyst at OANDA.
Prices have been helped by a historic oil output cut of 9.7 million barrels per day (bpd), about one-tenth of pre-COVID-9 daily demand, by the Organisation of the Petroleum Exporting Countries (OPEC), Russia and others, a group known as OPEC+.
An increasing relaxation of government lockdowns that sought to contain the spread of the virus has lifted demand by stimulating travel and commercial activities, also strengthening the market.
OPEC+ agreed on Saturday to sustain the historic cut for another month till the end of July to support efforts to clear the glut and boost the partial compliance with the reduction.
While this supported prices, the market came under pressure after Saudi Arabia, Kuwait and the United Arab Emirates resolved not to extend their additional voluntary supply cuts.
