Oil edged lower after its biggest drop in almost two weeks as swelling U.S. crude stockpiles and a surge in coronavirus cases across the nation raised concerns about demand in the world’s largest economy.

Futures in New York dropped below $38 a barrel after losing 5.9% Wednesday as American crude inventories rose for a third straight week. New infections reached daily records in Florida, California and Texas, where the governor said a “massive outbreak” is sweeping the state. U.S. gasoline futures tumbled the most in two months amid fears that lockdowns may need to be re-imposed.

Activity at Indian refineries is still well down on year-earlier levels, more evidence that Asian nations aren’t managing to replicate China’s fast recovery. The pessimism has pushed global benchmark Brent’s prompt timespread back into contango. The market structure -- where near-dated contracts are cheaper than later-dated ones -- suggests there’s still concern about over-supply.

While the demand picture is still murky, the OPEC+ alliance’s production cuts and involuntary supply reductions from the U.S. shale patch have gone a long way to rebalance the oil market. However, that’s happened against the backdrop of a global economy that’s still struggling to shake off the coronavirus. The International Monetary Fund predicted on Wednesday a significantly deeper recession than it anticipated two months ago.

West Texas Intermediate for August delivery fell 0.7% to $37.75 a barrel on the New York Mercantile Exchange as of 10:27 a.m. in Singapore. The U.S. benchmark is heading for just its second weekly loss since late April.

Brent for the same month dropped 0.8% to $39.99 a barrel on the ICE Futures Europe exchange after losing 5.4% Wednesday. The prompt timespread was 25 cents in contango, compared with 5 cents in backwardation at the end of last week.

Source: Bloomberg