U.S. West Texas Intermediate and international-benchmark crude oil finished lower last week after reversing earlier gains that took prices inside the price gap formed in early March. Although technicians will argue that the gap stopped the rally and the momentum, most traders will agree that the threat of the second wave contagion of COVID-19 capped the bullish sentiment that we’ve been tracking for the last six to eight weeks.

Last week, August WTI crude oil settled at $38.49, down $1.34 or -3.36% and September Brent crude oil closed at $40.93, down $1.21 or -2.96%.

In addition to worries over the resurgence of the coronavirus pandemic, other factors capping the upside and encouraging investors to lighten up long positions were poor refining margins, high oil inventories and the resumption of U.S. production.

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday another build in crude oil inventories, this time of 1.749 million barrels for the week-ending June 19. Analysts were looking for a small inventory build of 299,000 barrels.

The API also reported a draw of 3.856 million barrels of gasoline for the week-ending June 19, compared to last week’s 4.267-barrel build. This week’s large draw compares to analyst expectations for a 1.304-million barrel draw for the week.

Distillate inventories were down by 2.605-million barrels for the week, compared to last week’s 919,000-barrel build, while Cushing inventories saw a draw of 325,000 barrels.

US Energy Information Administration Weekly Inventories Report

The EIA reported last Wednesday a 1.4-million-barrel increase in crude oil inventories for the week to June 19, with fuel inventories booking mixed results. Traders were looking for a build of 1.2-million-barrels.

The EIA also reported a draw of 1.7 million barrels of gasoline for the week-ended June 19, compared with a decline of the same size for the previous week. Gasoline production last week averaged 8.8 million barrels daily, up from 8.4 million barrels daily a week earlier.

In distillate fuels, where demand has been slower to recover than in gasoline, the EIA reported an inventory rise of 249,000 barrels for the week to June 19, up from a 1.4-million-barrel draw reported for the previous week. Production of distillates averaged 4.6 million bpd last week, compared with 4.5 million bpd a week earlier.

Refinery runs averaged 13.8 million bpd, up from 13.6 million bpd a week earlier.

Weekly Forecast

Despite efforts by OPEC+ to reduce supplies, crude inventories in the United States, the world’s largest oil producer and consumer, have hit all-time highs. Conditions could worsen if a second-wave of COVID-19 causes more demand destruction.