Oil down $2 as US crude inventories swell, Covid-19 resurgence feared

Oil prices fell $2 a barrel on Wednesday, as investors worried about record high crude inventories and feared that a second wave of the coronavirus pandemic could stall the reopening of global economies and cut fuel demand.

Brent crude was down $2.04, or 4.8 per cent , to $40.59 a barrel by 11:03 a.m. EDT (1503 GMT), a day after hitting its highest since prices started plunging in March. US West Texas Intermediate (WTI) crude fell $2.04, or 5.1 per cent , to $38.33 a barrel.

US crude oil inventories swelled last week by 1.4 million barrels, far exceeding analysts' expectations in a Reuters poll for a 299,000-barrel rise, the Energy Information Administration said, citing rising production.

US gasoline stocks fell by 1.7 million barrels to 255 million barrels, the EIA said.​

"Because of the increase in production and the increase in crude supplies, we're going negative," said Phil Flynn, senior analyst at Price Futures Group in Chicago. "But if you want to look for the silver lining in the report then it's definitely gasoline demand is coming back."

Mounting coronavirus cases in the United States, China, Latin America and India have unnerved investors and pressured oil prices.

"These are all important oil demand centers. 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.

Global Short-Term Crude Floating Storage https://fingfx.thomsonreuters.com/gfx/ce/azgvorbykpd/IEA.JPG

Upbeat European manufacturing surveys offered some support, but European Central Bank chief economist Philip Lane cautioned that the euro zone economy still needed a long time to recover.

India's oil imports in May hit the lowest since October 2011 as refiners with brimming crude inventories 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.