Oil prices hit by record US crude inventories, Fed down

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Oil prices fell on Thursday, struck by another record increase in US crude stocks and by the Federal Reserve’s projections that the world’s largest economy will shrink 6.5% this year.Brent crude futures erased Wednesday’s gains, down 3.5%, or $ 1.44, to $ 40.27 a barrel. West Texas Intermediate oil lost 4.1%, or $ 1.62, to $ 37.98 a barrel.

With demand risks back in the foreground, the two benchmarks should experience their worst daily decline in two weeks.

US crude stocks unexpectedly increased from 5.7 million barrels in the week of June 5 to 538.1 million barrels – a record – as imports were boosted by the arrival of supplies purchased by refiners when Saudi Arabia flooded the market in March and April, Energy Information Administration (EIA) data showed.

It also showed that gasoline inventories rose more than expected to 258.7 million barrels. Distillate stocks, which include diesel and fuel oil, increased 1.6 million barrels, although the increase was smaller than in previous weeks.

Adding to price pressure, the US Federal Reserve has said unemployment in the US is expected to reach 9.3% by the end of 2020 and has said it will take years to fall, while interest rates are expected to stay close from zero at least until next year.

The total number of coronavirus cases in the United States exceeded 2 million on Wednesday, with new infections increasing slightly after five weeks of decline, according to a Reuters analysis.

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