Oil prices slumped on Wednesday following a larger-than-expected rise in US crude inventories and growing COVID-19 infections in several US states.

The West Texas Intermediate (WTI) benchmark sank by more than 5.8 per cent to $US38.01 ($55.20) per barrel on Wednesday while the broader Brent crude benchmark fell 5.4 per cent to $US40.31 per barrel.

This comes after the US Energy Information Administration reported a 1.4-million-barrel increase in crude oil inventories for the week to June 19, which is an increase on the previous week’s 1.2-million-barrel figure.

Several US states have reported spikes in COVID-19 cases, raising concerns that a second wave could further dampen oil demand.

While oil prices have rebounded since Wednesday’s fall with the WTI now trading above $US39, the fall highlights the view expressed by some industry watchers that its rally has been overblown.

Rystad Energy has warned that $US40 per barrel oil is the new normal as there are valid concerns on the demand side, while UK supermajor BP slashed its long-term price expectations by 27 per cent earlier this month.

Global resources consultancy Wood Mackenzie has also reduced its long-term Brent price assumption from $US60 per barrel to $US50 per barrel.

Despite this, some analysts are still feeling bullish about the fossil fuel with JP Morgan sticking to its prediction that oil prices could soar to $US190 per barrel as a “very large supply-demand deficit” emerges in 2022.

Winchester Energy (ASX:WEL) is likely to be reasonably comfortable at current oil prices given the company said earlier this month it had reduced oil production costs to just $US2.46 per barrel.

This is based on the average operating costs for its three most recently drilled producing wells at the Mustang Field in Texas.

Winchester also noted at the time that it was reviewing and assessing new project/play opportunities made available by the low oil price environment.

Over in Canada, Whitebark Energy (ASX:WBE) expects to recommence production from its Rex-3 well after installing a subsurface pump in the well.

It said late last week that running of the pump would be done along with other routine maintenance activities at its Wizard Lake oil field.

Rex-3 has flowed 35,800 barrels of oil and 251 million cubic feet of gas unassisted during the five months since production started in January.

Meanwhile, 88 Energy (ASX:88E) has extended its recommended takeover offer for fellow Alaska-focused explorer XCD Energy (ASX:XCD) to July 13.

The company has already secured commitments representing 79.84 per cent of XCD’s shares and 79.22 per cent of XCD’s listed options.

88 Energy is offering XCD shareholders 2.4 88E shares for every XCD share they own and 0.7 88E shares for every XCD listed option.

The combined company will have a diversified portfolio of three oil projects in Alaska’s highly prospective North Slope province.