Oil prices fell on Thursday after three sessions of gains as restrictions on travel worldwide crimped fuel demand, with U.S. crude futures plunging about 4% after the United States scrapped plans to buy domestic oil for its emergency reserve.
Concerns about demand also overshadowed expectations that a $2 trillion U.S. stimulus package will bolster economic activity.
West Texas Intermediate (WTI) crude futures dropped 91 cents, or 3.7%, to $23.58 a barrel by 11:11 a.m. EDT. Brent crude futures fell 11 cents to $27.28 a barrel. Both contracts are down about 60% this year.
U.S. futures were notably weaker than international benchmark Brent crude. The U.S. Department of Energy scrapped a plan to purchase domestic crude oil for its Strategic Petroleum Reserve after funding was not included in the broader stimulus package.
"The SPR element is totally a domestic issue and it has been percolating in the market for a couple weeks," said Bob Yawger, director of futures at Mizuho in New York. "There was a certain assumption that it was going to happen so you had that backstop, to a certain degree, that didn't exist for the international benchmark. But just overnight, it evaporated."
The U.S. Senate unanimously passed the $2 trillion bill aimed at helping struggling workers and industries hurt by the impact of the coronavirus epidemic, and sent the legislation to the House of Representatives. The House is expected to vote on Friday.
But with demand disappearing and output rising, the outlook for oil is bleak.
Goldman Sachs forecast global oil demand, which stood at around 100 million barrels per day last year, will fall by 10.5 million barrels per day in March and 18.7 million barrels per day in April. For the year, oil consumption is expected to contract by around 4.25 million barrels per day, the Wall Street bank said.
"Global isolation measures are leading to an unprecedented collapse in oil demand," it said.
The weakening demand is leading oil refineries from Texas to Thailand to reduce operating rates.
The world's top oil and gas companies have cut spending by about 20 percent, including majors Chevron, Total and Royal Dutch Shell.
Brazil's Petrobras said it was dialing back short-term production by 100,000 barrels per day, delaying a dividend payment and trimming its 2020 investment plan.
At the same time, the collapse of a supply-cut pact between the Organization of Petroleum Exporting Countries and other producers led by Russia, known as OPEC+, is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million barrels per day from May.
Oil stockpiles are already rising, with tanks around the world filling fast despite a 50 percent to 100 percent jump in leasing costs.
U.S. crude inventories rose by 1.6 million barrels last week, marking the ninth straight week of increases.
Products supplied, a proxy for U.S. demand, dropped nearly 10 percent to 19.4 million barrels per day, government data showed on Wednesday.