NEW YORK: Oil prices fell on Wednesday as investors worried about fuel demand due to fresh outbreaks of COVID-19, though prices drew some support after US stocks of diesel fuel fell for the first time in weeks and US oil production dropped sharply.
Brent crude was down 31 cents, or 0.8 per cent, at $40.65 a barrel at 10:50 EST (1450 GMT). US West Texas Intermediate (WTI) fell 43 cents, or 1.1 per cent, to $37.95 a barrel.
US crude inventories rose by 1.2 million barrels, but distillate stockpiles, which include diesel and heating oil, fell by 1.4 million barrels following weeks of significant builds as refiners continued to blend jet fuel into their distillate pool, EIA data showed on Wednesday.
“That snapped a 10-week streak of builds, and the market needed that,” said Bob Yawger, director of energy futures at Mizuho in New York.US oil production fell last week to 10.5 million barrels per day, lowest since March 2018. Some of that was due to Storm Cristobal, which shut more than one-third of US offshore output.
The World Health Organization said it was moving to update its guidelines after results showed the corticosteroid medication dexamethasone cut death rates by about a third among the most severely ill COVID-19 patients.
However, the virus is spreading in parts of the United States, while scores of flights were cancelled and schools were shut in Beijing to head off a new virus outbreak in the Chinese city.
“We think the oil market is not currently pricing in a significant probability of either second waves of coronavirus cases in key consumers and the associated lockdowns, or anything less than a rapid return to economic business-as-usual,” Standard Chartered analysts said.
Weak economic activity is still weighing on demand for crude. US fuel demand, as measured by product supplied, is down 20 per cent over the past four weeks, compared with the year-ago period, EIA said.