Oil slips as fresh COVID-19 outbreaks face draw in U.S. fuel stocks
By Laura Sanicola
NEW YORK (Reuters) - Oil prices fell on Wednesday as US distillate stocks declined for the first time since March and a sharp drop in US crude oil production caused concerns about fuel demand due to new COVID 19 outbreaks.
Brent crude fell 14 cents or 0.3% to $ 40.82 a barrel at 12:54 EDT (1654 GMT). The US West Texas Intermediate (WTI) fell 22 cents or 0.6% to $ 38.16 a barrel.
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US crude stocks hit a record high for the second consecutive week last week, but distillate stocks fell after weeks of significant growth as refineries continued to add jet fuel to their distillate pool, government data showed.
"It triggered a 10-week series of builds, and the market needed it," said Bob Yawger, director of energy futures at Mizuho in New York.
US crude oil production fell 600,000 barrels per day to 10.5 million bpd last week, the lowest since March 2018. Part of this was due to Storm Cristobal, which shutdown more than a third of US offshore production.
According to crude oil buyers and analysts, US shale producers are expected to restore crude oil production by around half a million bpd by the end of June.
The World Health Organization said it will update its guidelines after the results showed that the corticosteroid drug dexamethasone reduced the mortality rate among the most seriously ill COVID-19 patients by about a third.
However, the virus is spreading to parts of the U.S. while flights have been canceled and schools in Beijing have been closed to prevent a new virus outbreak in the Chinese capital.
"We believe that the oil market is currently not pricing in a significant likelihood of a second wave of coronavirus cases among key consumers and the associated locks, or less than a quick return to normal business," said Standard Chartered analysts.
Weak economic activity continues to weigh on demand. US fuel demand, measured by product delivered, has decreased 20% year over year in the past four weeks, the government said.
OECD stocks across the oil industry https://fingfx.thomsonreuters.com/gfx/ce/xegpbydrkvq/15.JPG
(Reporting by Laura Sanicola in New York; additional reporting by Bozorgmehr Sharafedin in London, Jane Chung in Seoul; editing by David Gregorio and Marguerita Choy)
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