Oil prices fell on Tuesday over anxieties that a new wave of coronavirus infections worldwide will cause fuel demand recovery to stall amid tighter lockdowns just as major producers increase output.
Brent crude futures inched lower by 60 cents or 1.46% to $40.41 per barrel at 10:51 West Africa Time just as U.S. West Texas Intermediate (WTI) crude futures slipped by 65 cents or 1.47% to $43.50 a barrel.
The drop came after WTI advanced by 1.8% and Brent lifted by 1.5% on Monday, buoyed by better-than-expected manufacturing activity data in Europe, Asia and the United States, showing factories were recovering from the worst of the early coronavirus pandemic impact.
Bonny Light, Nigeria’s banner crude oil grade, added 96 cents or 2.24% the same day to close at $43.88 per barrel just as Qua Iboe, another major national offering rose to the same level, chalking up 58 cents or 1.34% to close at $43.88 a barrel.
‘On the demand side, we had quite encouraging global manufacturing (data) … but there’s still quite a bit of evidence of the oil demand recovery stalling in quite a few markets with a resurgence of COVID-19,’ said Lachlan Shaw, Head of Commodity Research at National Australia Bank (NAB).
Cities from Manila to Melbourne are firming up lockdowns to deal with new cases while Norway has halted cruise ship traffic in the latest European travel alarm.
In a further indication of partial rebound, analysts project U.S. refined product inventories rose last week, according to a preliminary Reuters poll ahead of figures due from the American Petroleum Institute industry group later on Tuesday and the United States government on Wednesday.
U.S. stocks rose by average 600,000 barrels, five analysts estimated. Distillate inventories, including diesel and heating oil, possibly climbed by 800,000 barrels, while oil storage tumbled by 3.3 million barrels in the week to 31st July.
Also, producers in the Organisation of the Petroleum Exporting (OPEC) and its allies, a grouping commonly known as OPEC+, are ramping up production in August, adding nearly 1.5 million barrels a day to supply.
Producers in the U.S. are also mulling a restart of shut-in production while inventories approach record highs.
‘I think it is fair to say that most oil market participants expected more downward pressure on oil to start the week with COVID-19 ravaging the landscape and OPEC+ adding more barrels into play,’ Stephen Innes, Chief Global Markets Strategist at AxiCorp, said in a daily note.
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