Oil falls on bleak economic outlook despite recovering demand

Oil prices fell on Wednesday as worries about the economic impact of the pandemic dwarfed demand recovery and output cuts.

Brent crude futures for July contract dropped 0.3%, or 11 cents, at $34.54 per barrel. U.S. West Texas Intermediate crude futures for July delivery lost 0.4%, or 13 cents, at $31.83 per barrel.

Oil prices have gained in recent weeks, with both Brent and WTI surging above $30 for the first time in a month. The gains were supported by big production cuts and signs of recovering demand.

However, the U.S. Federal Reserve’s statement that the economic outlook remains bleak weighed on oil prices.

Fed Chairman Jerome Powell said that unemployment in local and state governments will slow economic recovery. Boston Fed President Eric Rosengren said that the jobless rate in the United States will likely remain at double-digit levels at the end of 2020.

U.S. crude inventories plunged 4.8 million barrels to 521.3 million barrels in the week ended May 15, according to the American Petroleum Institute.