Oil prices are on track for their biggest daily fall in two weeks after a combination of a record build in stocks and the Federal Reserve’s economic predictions spooked traders.
Worldwide benchmark Brent crude swiftly pared yesterday’s gains this morning, falling 3.4 per cent to $40.29 per barrel.
US standard West Texas Intermediate followed suit, dropping 3.8 per cent to hover near the $38 mark.
Yesterday, data from the US Energy Information Administration showed that crude inventories had surged to their highest levels ever recorded, despite analyst predictions of a 1.7m barrel drop.
In total, stocks rose by 5.7m barrels to total 538.1m after imports from Saudi Arabia boosted supplies.
On top of the rise, the Fed said employment would likely reach 9.3 per cent this year, and predicted that it would take years to get back to pre-coronavirus levels.
In addition, policymakers said that interest rates would remain close to zero through next year, further depressing the outlook for markets.
Rystad Energy’s senior oil markets analyst Paola Rodriguez-Masiu said that although markets had rallied in previous weeks, prices were now back under the pump.
“Prices are once again under pressure as concerns over the pace of the demand recovery intensified”, she said:
“Higher stocks will always be a bearish factor. But there is a larger ‘what if’ that traders have started pricing in. And that is the possibility of demand not coming back as quickly as hoped for.
“That’s because of more industrial caution and changed patterns of work, but also because of the realistic scenario of a second wave of the Covid-19 pandemic and all the consequences that will bring for demand and operations”, she added.