Oil prices slumped as much as 3% on Thursday, the most in over two weeks, as the continued surge in new U.S. coronavirus cases sparked fears that the world’s largest economy might be forced into round of wide-scale lockdowns.
“In the U.S., economic activity will require a successful reopening of schools in autumn and that may hinge on a major reversal on mandating masks,” Ed Moya, senior market strategist at New York-based OANDA said in a note on oil. “The virus spread is not plateauing as many populous states (Texas and Florida) are still seeing significant increases in hospitalizations.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, was down $1.26, or 3.1%, at $39.64 per barrel by 1:26 PM ET (17:26 GMT). London-traded Brent, the global benchmark for oil, slid $1.01, or 2.3%, to $42.28.
Top U.S. pandemics expert Anthony Fauci, speaking on a podcast hosted by the Wall Street Journal, said new COVID-19 cases in the country were seeing “exponential growth.”
“It went from an average of about 20,000 to 40,000 and 50,000. That’s doubling. If you continue doubling, two times 50 is 100,” Fauci said. “Any state that is having a serious problem, that state should seriously look at shutting down. It’s not for me to say because each state is different.”
Data shows that more than 3 million Americans have already been infected by the COVID-19, with a death toll exceeding 133,000. On Wednesday, the United States reported a daily record of more than 60,000 cases.
Fauci warned recently that the daily case growth could reach 100,000 without proper social-distancing and other safety measures. A new model by the University of Washington also predicts 200,000 U.S. coronavirus deaths by Oct. 1, casting further doubts about economic recovery.
U.S. gasoline demand was falling in areas where lockdowns were being reinstated, Lachlan Shaw, head of commodity research at National Australia Bank (OTC:NABZY), was quoted saying by Reuters, although demand for fuels continued to recover in the economically-crucial East Coast.
Thursday’s slump in oil prices came after government data from a day ago showing U.S. crude stockpiles rose by a staggering 5.65 million barrels last month.
Conversely, analysts followed by had forecast a crude draw of 3.1 million barrels for last week to follow through with the previous week’s 7.1 million-barrel slide.
The crude build wasn’t the only bearish picture for oil. U.S. distillate inventories came in 3.1 million barrels higher versus the previous week’s draw of 593,000. Analysts had expected another modest decline of 75,000 barrels last week.
U.S. oil production, meanwhile, stayed put at an estimated 11 million barrels per day, indicating that the huge slides in output seen between March and April during the height of the coronavirus pandemic was practically over. The United States produced a record high 13.1 million barrels daily in mid-March before demand destruction triggered by the Covid-19 forced drillers in U.S. shale oil patches to slash operating rigs and shut in some wells.