(Bloomberg) -- Oil edged lower in Asia as persistent concerns over the economic damage wrought by Covid-19 countered optimism that drastic supply cuts by the world’s top producers are eroding a supply glut.
Futures in New York fell 0.9%, after rising 1% on Tuesday for a fourth day of gains. Equity markets dropped back following reports that Moderna (NASDAQ:MRNA) Inc.’s vaccine study, which was credited in part for Monday’s rally, didn’t produce enough critical data to assess its success. Adding to the cautious tone, Federal Reserve Chairman Jerome Powell told a Senate committee that Americans could start losing their homes and warned that long-term unemployment can damage the economy.
Still, the oil market is in much better shape than it was a month ago. The front month U.S. futures contract rolled over to July without the drama seen last month, when the expiring May contract crashed into negative territory on concerns over brim-full storage levels. The June contract rose ahead of its expiry on Tuesday and traded at a premium to July -- suggesting concerns about storage capacity have eased.
The supply response to the Covid crisis is gathering pace. An American Petroleum Institute report showed that supplies in Cushing, Oklahoma, fell by 5.04 million barrels last week, according to people familiar. U.S. crude stockpiles fell 4.84 million barrels, according to the report. Meanwhile, Citigroup Inc (NYSE:C). said the oil surplus weighing on the market in the second quarter is expected to turn into a record deficit in the third.
Oil production from the top seven shale regions in the U.S. is set to tumble to levels not seen since 2018, according to the Energy Information Administration’s latest Drilling Productivity Report, as drillers scale back in response to the recent price collapse.
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