By Barani Krishnan
Investing.com - Crude prices tumbled about 5% on Wednesday, falling below the key $40 per barrel support, after an unexpectedly large U.S. crude stockpile build for last week reported by the government reinforced concerns about depleting demand for fuel amid the worsening global outbreak of Covid-19.
New York-traded West Texas Intermediate, the leading indicator for U.S. crude prices, lost $2.18, or 5%, to settle at $37.39 per barrel.
London-traded Brent, the global benchmark for oil, slid $2.08, or 5.%, to settle at $39.12.
A rout in Wall Street stocks intensified the selloff in oil. The three leading U.S. equity indicators Dow, S&P 500 and Nasdaq lost almost 4% each as Covid-19 cases exploded across Europe.
Responding to the outbreak, Germany ordered a return to lockdowns and France was reported to be considering the same. The United Kingdom reported 24,701 new COVID-19 cases while the case count in former U.S. hotspot New York rose above 500,000.
Adding to investors’ fears were heightened political uncertainty In the United States ahead of the November 3 election where President Donald Trump faces resurgent Democrat candidate Joe Biden.
“WTI crude could remain vulnerable if the U.S. follows Europe’s lead in bringing back tougher lockdowns,” Ed Moya, analysts at New York’s OANDA said, amid repeated avowals by the Trump administration not to allow tighter curbs on the economy.
“This amount of virus pessimism was expected to happen during the winter surge, which was hopefully going to be accompanied with positive news on the vaccines and treatments front.,” Moya added. “WTI crude should still see strong support in the mid-$30s, but that could tentatively break if the dollar rally is overextended. “
U.S. crude stockpiles rose 4.3 million barrels during the week ended Oct. 23, against expectations for an increase of 1.23 million barrels, the Energy Information Administration reported earlier on Wednesday. In the prior week to Oct. 16, crude stocks fell 1 million barrels.
Inventories of fuel products, however, saw declines last week, though that did not help sentiment much on the market.
Gasoline stockpiles fell 892,000 barrels last week versus a forecast 961,000. In the prior week, they rose by 1.9 million.
Diesel-led inventories of distillates slid by 4.5 million barrels, more than double the forecast drop of 2.1 million. In the prior week, they declined by 3.8 million.