Oil prices reported heavy losses for the second week of June after posting massive gains in the past seven consecutive quarters, as investor’s concerns increased over the prospects for the second wave of coronavirus following the sharp growth in virus infections across the United States.
Oil prices shed almost 8% of value in Thursday trading and extended the slide on Friday. Both oil benchmarks lost close to 10% of value this week.
The larger than expected build in US stockpiles added to bearish sentiments. The Energy Information Administration said that U.S. crude inventories jumped by 5.7 million barrels last week, largely missing analysts forecast for 3.2 million barrels decline.
“Supply glut overhang and diminishing crude demand expectations are sinking oil prices sharply,” he said in a market update. “Second wave coronavirus risks [are] crushing hopes for a steady global economic recovery that was spearheading prospects of improving crude demand.”
The depressed economic outlook from Federal Reserves has also damaged sentiments that demand is catching up supplies.
Fed officials said they expect economic pain to last for years, with expectations that the unemployment rate will stand around 9.3% this year.
“Many millions have lost their jobs,” Fed Chairman Jerome Powell said at a news conference after the Fed’s two-day policy meeting, adding the extent of the downturn and pace of the recovery remain “extraordinarily uncertain.”
In the past couple of weeks, oil prices soared only due to the prospects of increasing demand and slowing supplies.
“Oil prices have rebounded sharply … helped by positive surprises in incoming data on demand and continued OPEC+ restraint,” Barclays said in a note.
OPEC plus has announced to sustain production cuts of 9.7 million barrels by the end of July. On the other hand, US oil producers have also slashed oil production forecast amid lower prices.