Oil prices dropped on Tuesday over worries that a new coronavirus wave, notably in the United States, would hurt fuel demand rebound.
Brent crude futures fell by 27 cents or 0.63% to $42.83 per barrel at 09:58 West Africa Time, having hit a $43.19 intraday high.
West Texas Intermediate crude futures, its U.S. counterpart offering, slipped by 32 cents or 0.79% to $40.31 a barrel.
Bonny Light, Nigeria’s principal crude grade, went higher by 36 cents or 0.83% to $43.69 per barrel at the last session just as Qua Iboe, another key national grade advanced 39 cents or 0.91% to $43.26 a barrel.
As 16 U.S. states posted unprecedented upswings in virus cases in the first five days of July according to a tally by Reuters, there is heightening apprehension that public health curbs deployed to contain COVID-19’s advance will restrain demand for fuel in world’s biggest oil consumer.
Florida is restoring some caps on economic reopening to confront the escalating cases. Two of U.S.’ biggest states by population and economic magnitude, are similarly recording sharp uptick in infection rates as a percentage of diagnostic tests conducted last week.
“The potential for demand destruction as lockdown re-instatement looks more likely are combining with concerns about OPEC+ discipline to weigh on oil prices,” CMC Markets’ Chief Market Strategist Michael McCarthy in Sydney said in an email.
Other parts of the world like Australia are also taking a bashing from the new upsurge of cases.
Jeffrey Halley, Senior Market Analyst, Asia Pacific, of OANDA said “oil is marooned in range-trading mode, balanced by the hopes of economic recovery in Asia and Europe, and concerns in the U.S. and other parts of the world.
“That means that for now, it lacks the momentum to strongly move one way of the other”
Meanwhile, the Organisation of the Petroleum Exporting Countries (OPEC) and its Russia-led allies, jointly known as OPEC+, are cutting supply by 9.7 million barrels per day (bpd) for the third consecutive month this month.
Cuts are expected to slump to 7.7 million bpd beginning from August, adding supply at the same time and U.S. fuel demand, particularly for gasoline, remains hampered by the pandemic outbreak.
“Summer driving demand in the U.S. is low, keeping gasoline demand subdued, and a reintroduction of lockdowns is a major headwind,” ANZ said in a note.
Statistics from the American Petroleum Institute industry group later on Tuesday and the U.S. Energy Information Administration on Wednesday are expected to show a 100,000 barrel rise gasoline inventories according to six experts polled by Reuters.
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