(Bloomberg) — Oil slumped in New York as an increase in American crude stockpiles to a record high raised fresh concerns about excess supply, while the Federal Reserve forecast a long road to recovery for the U.S. economy.

Futures lost 4.1% to trade near $38 a barrel, erasing all of the gains from the past two sessions. Crude inventories unexpectedly rose last week, even as oil production fell, while gasoline stockpiles also saw a surprise expansion. Fed Chairman Jerome Powell said the pandemic could inflict longer-lasting damage on the economy and the central bank signaled it would keep rates near zero possibly for years to come. There are also fears that a second wave of infections in the U.S. may derail its fragile recovery.

Global supply cuts and the easing of lockdowns in some countries has pushed prices higher after oil plunged below zero in April. However, the recovery is expected to be fragile and uneven, and there are concerns that producers may pump more with crude above $30 a barrel, adding to a glut. A new wave of coronavirus infections pushed the overall count in the U.S. past 2 million cases, with hospitalizations in Texas jumping.

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“Prices may have run ahead of themselves over the last month or so,” Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore, said by phone. “As we approach the second half of the year, there will be some rethinking about how far this rally can continue given the high volume of stockpiles that still exists.”

U.S. crude stockpiles rose by 5.72 million barrels last week to 538.1 million barrels, according to the Energy Information Administration. That’s the highest level in data compiled by Bloomberg since 1982. Still, oil production fell for a 10th week, while supplies at the key storage hub of Cushing, Oklahoma, dropped below 50 million barrels.

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Meanwhile, in a positive sign, a glut of benchmark North Sea oil that’s been sitting on ocean-going tankers for weeks is starting to diminish. Millions of barrels of the region’s unwanted crude have been stashed on vessels since the coronavirus caused a demand collapse, but now the volumes are starting to shrink sharply, data compiled by Bloomberg show.