Looking ahead, USA output may continue to recover following Hurricane Laura, and a further pick up in crude inventories may keep energy prices under pressure as OPEC's most recent Monthly Oil Market Report (MOMR) shows a reduction in the global demand forecast, with "the downward revision is mainly to reflect weaker-than-expected data in 2Q20 in a few non-OECD countries, in addition to considering the recent adjustment to global GDP in 2020 from -3.7% in July to -4.0% in August".
The build in crude inventories is a "precursor that we're not going to see the draws that people were expecting", said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC.
Brent crude LCOc1 futures fell $0.44 to $40.35 per barrel, after rising 2.5% the previous day. But is it going to be enough to outweigh the lack of demand?
"While U.S. crude oil production continues to recover following Hurricane Laura, the numbers show that refineries further reduced run rates over the last week, " ING Economics said in a note.
Despite Wednesday's gains, oil is still on track to decline this week as a faltering demand recovery in parts of the world and the onset of refinery maintenance season weighs on the outlook for consumption already devastated by the pandemic. Analysts polled by S&P Global Platts had forecast a fall of 500,000 barrels.
"Short-term oil market fundamentals look soft: the demand recovery is fragile, inventories and spare capacity are high, and refining margins are low", Morgan Stanley said. Since the start of the month, road traffic has grown in Europe and Asia.
Total U.S. crude inventories, excluding those in the Strategic Petroleum Reserve stood at 500.4 million barrels, about 14% above the five-year average for this time of year.
Also, European oil majors including BP made headlines on Thursday for snapping up offshore wind developments in a bid to curb fossil fuel dependence and reach their climate goals (BP's deal with Norway's Equinor was valued at $1.1 billion). With "a pragmatic OPEC+ supply philosophy and expected shale output moderation, after the recent price drop, a more moderate production trajectory should resume market rebalancing".
Still, the deteriorating outlook for oil has led to declines in US output.