US oil prices slid from fourth-month highs after inventories at the physical delivery point of West Texas Intermediate at Cushing in Oklahoma registered their biggest increase since May.
WTI, which tracks US crude, was down 1 per cent to trade at $41.50 per barrel at 1.59pm UAE time, while Brent, the most widely-traded oil benchmark, was down 0.81 per cent at $43.96 per barrel.
The industry-funded American Petroleum Institute reported an increase in US crude stockpiles by 7.5 million barrels, the biggest increase in nearly two months. Analysts had anticipated a decline of 2.1 million barrels.
Deliveries to Cushing also rose by 716,000 barrels last week, while gasoline inventories declined for the third consecutive week, API said.
The federal Energy Information Administration is expected to release data on Wednesday, with analysts expecting a withdrawal of around 2.2 million barrels of inventory, according to Bloomberg.
Meanwhile, global cases of coronavirus neared the 15 million mark on Wednesday, according to the Johns Hopkins University tracker. The US, the world’s largest economy, accounts for more than a quarter of the cases. The global death toll from the pandemic surged past 600,000 earlier this week, with the US, Brazil and the UK accounting for the highest number of fatalities. Concerns have mounted over the growing number of cases in several emerging economies such as Brazil, India, Russia and South Africa, which follow the US in case numbers.
The high rate of infections in the developing world has dampened demand for crude at a time when economies, particularly in Europe, are cautiously easing lockdowns.
Oil producers who are part of the Opec+ group also plan to ease output curbs following positive indications of a pick-up in demand.
The producers, led by Saudi Arabia and Russia, are expected to lower the restrictions to 7.7 million barrels per day from August 1, from an earlier 9.7m bpd cut.
JBC Energy expects the near-term momentum in the recovery of oil demand to slow amid strong headwinds from developing economies.
The consultancy expects demand recovery to waver 3 per cent month-on-month over July and August, compared with 6 per cent in May and June.
"Over [the second half of 2020], we expect oil products demand to average some 6m bpd lower year-on-year and, while jet/kerosene remains the key contributor to weakness, providing close of half to the downside, gasoline and gasoil/diesel are looking increasingly unlikely to see a full recovery later this year, with economic uncertainty trumping vaccine hopes.”
