Oil tanks 6% on surging COVID-19 cases and inventory build-ups

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  • Oil futures tanked on Wednesday as escalating coronavirus fears and surging US stockpiles drove new uncertainty around the commodity market’s recovery.
  • West Texas Intermediate crude sank as much as 6.4%, to $37.04 per barrel. Brent crude, oil’s international standard, tumbled 5.8%, to $38.83 per barrel, at intraday lows.
  • A global resurgence in COVID-19 cases has intensified concerns around oil demand. France and Germany are reportedly set to start new lockdowns to curb the virus’ spread.
  • US crude inventories climbed by 4.3 million barrels last week, the Energy Information Administration said Wednesday. The uptick is the biggest since late July and suggests demand in the US is moderating.
  • Watch oil futures trade live here.

Crude oil futures plummeted further below the key $40 support level on Wednesday as surging coronavirus cases and rising stockpiles drove fresh concern about prolonged market weakness.

Contracts for West Texas Intermediate crude sank as much as 6.4%, to $37.04 per barrel. That’s the lowest level since early October. Brent crude, oil’s international standard, tumbled 5.8%, to $38.83 per barrel, at intraday lows.

The global resurgence in coronavirus cases has intensified concerns around whether oil demand can return to pre-pandemic levels. Prices first plummeted in March as initial outbreaks curbed travel activity and prompted widespread lockdowns.

Another wave of cases risks a similar decline in demand as oil hovers around $40 per barrel. Europe is already taking action to curb the virus’ spread, with Germany and France reportedly set to begin new lockdowns.

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A Wednesday morning report from the Energy Information Administration added to oil’s slump. US crude oil inventories climbed by 4.3 million barrels last week, according to the agency, the biggest stockpile increase since late July. Total inventories stand at 492.4 million barrels, roughly 9% higher than the five-year average for this time of year.

The oil sell-off joins other sliding markets in choppy Wednesday trading. The S&P 500 tumbled the most in nearly two months on new coronavirus concerns. Cboe’s VIX index – Wall Street’s preferred gauge of market volatility – surged to its highest level since mid-June. 

WTI futures traded at $37.11 per barrel as of 11:30 a.m. ET Wednesday, down roughly 40% year-to-date.

Brent crude traded at $39.03 per barrel, down 41% year-to-date.

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