Oil snapped a two-day gain as a second wave of coronavirus cases in China and a report pointing to a further swelling in U.S. stockpiles cast doubt on the demand outlook in the world’s two largest economies.
Futures in New York fell below $38 a barrel after climbing almost 6% over the previous two sessions. Beijing has ordered all schools to close in an escalation of containment measures as its struggles to halt the outbreak that’s already spread to neighboring provinces. China is one of the world’s few energy consumption bright spots, staging a rapid recovery over the past few months.
The American Petroleum Institute reported U.S. oil stockpiles rose by 3.86 million barrels last week, according to people familiar with the data. Inventories grew to a record in the previous week, official figures showed, despite output having fallen by at least 2 million barrels a day since March.
While top global producers have curbed output in response to the pandemic, demand is returning only slowly and second-wave risks remain, making it tougher for crude prices to keep rallying. Global oil demand will rebound in 2021 but will take a couple of years to get back to pre-virus levels, the International Energy Agency said in its monthly report.
West Texas Intermediate crude for July delivery fell 2.1% to $37.58 a barrel on the New York Mercantile Exchange as of 8:13 a.m. in Singapore after rising 3.4% on Tuesday. Brent for August settlement dropped 1.4% to $40.37 a barrel on the ICE Futures Europe exchange following a 3.1% gain in the previous session.
Fuel use around the world will remain 2.5% lower next year than in 2019, largely because of the “the dire situation of the aviation sector,” the Paris-based IEA said in its first detailed assessment of 2021 released on Tuesday.