Traders shrugged off a further call by Saudi Arabia for larger production cuts to balance the market following a virus-induced demand slump
TOKYO: Oil prices fell in early Asian trading on Wednesday after industry data showed a rise in U.S. crude inventories and concerns mount about a possible second wave of the coronavirus pandemic in countries easing lockdowns.
Traders shrugged off a further call by Saudi Arabia for larger production cuts to balance the market following a virus-induced demand slump, after OPEC’s biggest producer said earlier this week it planned to add to cut again.
Brent crude LCOc1 was down 49 cents, or 1.6%, at $29.49 by 0034 GMT, having risen 1.2% on Tuesday. U.S. crude was down 41 cents, or 1.6%, at $25.37 a barrel, after jumping nearly 7% in the previous session.
“While the market feels more comfortable on the supply side of the equation, on the demand side, the focus will continue to revolve around the risks of easing lockdowns,” said Stephen Innes, chief markets strategist at AxiCorp.
U.S. infectious disease 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.
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.
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.
On Monday, Saudia 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.
The Organization of the Petroleum Export Countries (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% fall in global fuel demand.
In the United States, 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.
Official storage data from the U.S. Energy Information Administration is due later on Wednesday.