Oil futures fell sharply on Thursday, with U.S. prices dipping below the $40-a barrel mark, pressured by worries a resurgence in coronavirus cases around the world will cause demand to falter as major oil producers begin relaxing output curbs.
West Texas Intermediate crude for September delivery CL.1, -3.15% CLU20, -3.15% on the New York Mercantile Exchange dropped $1.63, or 4%, to $39.64 a barrel. September Brent crude BRNU20, -2.46% BRN00, -2.49%, w hich expires at the end of Friday’s session, was off $1.83, or 4.2%, at $41.92 a barrel on ICE Futures Europe.
“There is a clear toppish sentiment in oil markets where the hesitation to carry the prices higher could trigger a retracement below $40 per barrel,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note. “Prospects of slower economic recovery and the OPEC’s hurry to trim production cuts point that the demand/supply dynamics are not supportive of further short-term gains in oil markets.”
The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, are due in August to boost output by around 2 million barrels a day as they relax production curbs put in place earlier this year.
U.S. economic data Thursday showed an economy badly battered by the coronavirus shrank at a record 32.9% annual pace in the second quarter. Initial jobless claims rose by 12,000 to 1.434 million in the week ended July 25.
The number of COVID-19 cases around the world climbed above 17 million on Thursday, according to data aggregated by Johns Hopkins University, and the death toll rose to 667,688. The U.S. case tally climbed to 4.43 million and the death toll rose to 151,716, after crossing 150,000 late Wednesday. California and Florida posted single-day record death numbers on Wednesday and California added more than 12,300 cases, according to the New York Times.
Oil prices had edged higher Wednesday after the Energy Information Administration reported that U.S. crude inventories fell by 10.6 million barrels for the week ended July 24, the largest weekly decline since the 11.5 million-barrel fall reported for the week ended Dec. 27. The data, however, also revealed an unexpected climb in gasoline stocks, pulling futures prices for the fuel down by 1.9% Wednesday.
Meanwhile, natural-gas futures held on to early losses Thursday after the EIA reported Thursday that domestic supplies of natural gas rose by 26 billion cubic feet for the week ended July 24. That was a bit higher than the average increase of 23 billion forecast by analysts polled by S&P Global Platts.
September natural gas NGU20, -4.35% fell 4.8 cents, or 2.5%, to $1.882 per million British thermal units.
Losses for oil also came as traders watched storm developments in the Altantic.
Dan Flynn, market analyst at The Price Futures Group, said forecasts show Tropical Storm Isaias moving right through the state of Florida and up the Eastern Coast, “with minimal, if any, chance to enter the Gulf of Mexico,” where it could threaten oil and natural-gas production.
However, “as we have seen in the past, these storms are very unpredictable and could change course in...a moment,” he said in a note.