Oil prices have dropped after data from industry group American Petroleum Institute (API) showed a rise in US crude and fuel inventories.

This has renewed oversupply concerns and fears of falling fuel demand in the US.

According to Reuters, Brent crude futures fell $0.67, or 1.6%, to $40.51 per barrel, while West Texas Intermediate (WTI) futures declined $0.80, or 2.1%, to $38.14 a barrel.

Phillip Futures commodities senior manager Avtar Sandu was quoted by the news agency as saying: “While oil has rallied substantially last month, the market’s recovery from an historic crash remains fragile, with higher prices likely prompting producers to turn the taps back on even as the pandemic continues to quash energy demand.”

Data from the API showed a rise in the US crude inventories by about 8.4 million barrels, while diesel fuel and heating oil rose by 4.3 million barrels in the week that ended on 5 June.

Refinery run rate in Japan rose to 54.5% as economic activity in the country picked up after the government lifted a ‘state of emergency’ late last month.

In the recent weeks, oil prices have been supported as the Organization of the Petroleum Exporting Countries (OPEC), including Russia and other producers, together known as OPEC+, agreed to an extension of supply cuts.

However, Saudi Arabia, Kuwait and the United Arab Emirates (UAE) did not agree to extend an additional 1.18 million bpd in cuts on top of the OPEC+ cuts next month.

Meanwhile, investors are awaiting official data on stockpiles from the Energy Information Administration (EIA) which is due to be released later today.