In his first press briefing in months on the pandemic, U.S. President Donald Trump said the outbreak would probably get worse before it gets better, one of his first recent acknowledgements of the spread of the problem.
Industry group American Petroleum Institute (API) reported U.S. crude inventories rose last week by 7.5 million barrels, against expectations for a draw of 2.1 million barrels.
U.S. West Texas Intermediate (WTI) crude dropped 39 cents, or 0.9%, to $41.53.
Brent crude fell 35 cents, or 0.8%, to $43.97 a barrel.
Oil prices climbed about $1 the previous day, reaching their highest since March 6.
“Crude’s rally hit a brick wall after the API report showed a sharp rise in stockpiles and on President Trump’s warning that the coronavirus pandemic in the U.S. is likely to worsen,” said Edward Moya, senior market analyst at OANDA in New York.
“The crude demand outlook just got a double whammy with what could be the biggest rise in stockpiles since late May if confirmed by the EIA report tomorrow and on Trump’s downbeat virus briefing,” Moya said.
The U.S. Energy Information Administration (EIA) will release official oil data later on Wednesday.
The United States reported more than 1,000 deaths from COVID-19 on Tuesday, according to a Reuters tally, marking the first time since June 10 the nation has surpassed that grim milestone.
Economic data from Japan, the world’s fourth-largest oil consumer, also weighed on prices. Factory activity contracted for a 15th straight month in July, indicating lower economic activity because the pandemic is extending into the third quarter.
Oil prices rose on Tuesday on optimism for a COVID-19 vaccine and after European Union lenders agreed on a 750 billion euro ($859 billion) fund to prop up coronavirus-hit economies.
Still, the effect of those funds on prompt oil prices will be muted as it may take months to start flowing and the impact may take years to show, Stephen Innes, chief global markets strategist at AxiCorp said in a note on Wednesday.
There are also signs that Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), is still not meeting its target under an OPEC-led supply cut deal.
Russia, meanwhile, plans to cut its oil loadings from Baltic ports and Black Sea’s Novorossiisk in Aug. 1-10 by nearly a quarter compared with July 1-10, according to a preliminary loading schedule and Reuters calculations, which could support prices.