Oil extends slump on fresh concerns over supply-demand balance

Benchmarks head for their first weekly declines since April amid a rise in US coronavirus cases and an increase in the country's crude oil stockpiles

A crude oil pump jack in Texas, US. The country's crude and gasoline stockpiles rose to a record 538.1 million barrels last week, according to government data. US crude oil inventories rose to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.Photo: ReutersShow less

Oil prices fell on Friday, extending heavy overnight losses as a surge in US coronavirus cases this week raised the prospect of a second wave of the Covid-19 outbreak hitting demand in the world's biggest consumer of crude and fuel.

West Texas Intermediate was down 65 cents, or nearly two per cent, at $35.69 a barrel by 03:58am GMT (7:58am UAE time), after slumping more than eight per cent on Thursday.

Brent crude was down 58 cents, or 1.5 per cent, at $37.97 a barrel, having dropped nearly 8 per cent the previous session.

A rally that raised oil off April lows has come to a shuddering halt this week as the market faced the reality that the coronavirus pandemic may be far from over, with cases in the United States alone passing two million.

The oil benchmarks are heading for their first weekly declines in seven weeks, with Brent dropping about 10 per cent and US crude also down around 10 per cent.

Crude has rallied since plunging below zero in April as output cuts trimmed a glut and the easing of lockdowns boosted consumption. However, the recovery is expected to be uneven with Barclays predicting the market has already seen the fastest improvement in demand and steepest drop in supply.

"Oil prices have rebounded sharply … helped by positive surprises in incoming data on demand and continued Opec+ restraint," Barclays said in a note.

"But we expect the pace of price recovery to slow down along with rebalancing," it said.

Producers from the US, as well as from the Organisation of the Petroleum Exporting Countries (Opec) and its allies, have been cutting supply, some by record amounts.

Still, US crude and gasoline stockpiles grew last week, according to government data. US crude oil inventories rose to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.

That gave rise to worries about a continuing supply-demand imbalance, as states including Texas and Arizona are seeing their coronavirus infections jump and are struggling to cope with a growing number of patients filling hospital beds.

In Houston, Lina Hidalgo, senior official for the county that includes the city at the heart of the US oil industry, said "we may be approaching the precipice of a disaster".

More than 7.5 million people have been infected by the novel coronavirus around the world and more than 420,000 have died, according to the Johns Hopkins University tracker.