Oil prices hit by record U.S. crude inventories, bearish Fed

Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California.
Michael Heiman | Getty Images

Oil prices fell on Thursday, hit by another record build-up in U.S. crude inventories and the U.S. Federal Reserve's projections that the world's biggest economy would shrink 6.5% this year.

Brent crude futures erased Wednesday's gains, falling 6.3%, or $2.63, to $39.10 a barrel. West Texas Intermediate crude dropped 7.5%, or $2.98, to trade at $36.62 per barrel.

With demand risks back at the forefront, both benchmarks are set for their worst daily drop in two weeks.

U.S. crude inventories rose unexpectedly by 5.7 million barrels in the week to June 5 to 538.1 million barrels - a record - as imports were boosted by the arrival of supplies bought by refiners when Saudi Arabia flooded the market in March and April, Energy Information Administration (EIA) data showed.

It also showed gasoline stockpiles grew more than expected to 258.7 million barrels. Distillate stockpiles, which include diesel and heating oil, rose by 1.6 million barrels, although the increase was smaller than in previous weeks.

Adding pressure to prices, the U.S. Federal Reserve said U.S. unemployment was set to reach 9.3% at the end of 2020 and said it would take years to fall back, while interest rates were expected to stay near zero at least through next year.

Total U.S. coronavirus cases topped 2 million on Wednesday, with new infections rising slightly after five weeks of declines, according to a Reuters analysis.