(Bloomberg) -- Oil retreated from a five-week high in Asia after a warning on the risk of the U.S. making a premature exit from its coronavirus lockdown turned the spotlight back on a weak demand outlook.
Futures in New York fell as much as 2.2%, after surging 6.8% on Tuesday to the highest close since April 6. The market weakened in line with equities after Anthony Fauci, the U.S.’s top infectious disease official, said states reopening too quickly could set back the road to an economic recovery.
Earlier, crude had jumped after the U.S. Energy Information Administration revised down its 2020 and 2021 production forecasts. The news followed Saudi Arabia’s announcement that it would cut production by an additional 1 million barrels a day on top of its commitment under the OPEC+ agreement, easing concerns over storage capacity hitting limits worldwide.
An American Petroleum Institute report showed that supplies in Cushing, Oklahoma, fell by 2.26 million barrels last week, according to people familiar. If the EIA confirms the data on Wednesday, it will be the first draw at the delivery point for U.S. crude futures since the week ending February 28.
Oil prices are down almost 60% this year and there remains little clarity about when, and if, global consumption will fully return. Consultancy IHS Markit doesn’t see oil recovering to pre-virus levels until the second half of 2021. The U.S. also lowered its global petroleum demand forecast to 92.6 million barrels a day from 95.5 million a month ago. That compares with a supply outlook of more than 95 million barrels a day.
U.S. Energy Secretary Dan Brouillette said the country’s battered oil industry was on its way back as the economy starts to re-open.
“We now have 23 states that are opening up their local economies, that represents roughly 40% of the gasoline demand in the U.S.,” he said in an interview with Bloomberg Television on Tuesday.
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