Oil prices dropped on Monday as steep spikes in new global coronavirus cases drove some countries to resume partial lockdowns, heightening fears about the pace of economic rebound and demand for fuel.
Nigeria’s chief crude grade, Bonny Light shed 33 cents or 0.81% to close at $40.37 per barrel at the last session. However, another major national grade, Qua Iboe, $1.06 or 2.64% to close at $41.21 a barrel.
“Both contracts (Brent and WTI) are coming under stronger pressure this morning as the spectre of lockdowns returns,” said JBC Energy.
Death toll from the coronavirus pandemic climbed past half a million people on Sunday, according to a Reuters tally.
Nations like the United States, India and Brazil are seeing a new wave of infections, prompting authorities to partially reintroduce lockdowns, in what analysts say could be a recurring trend in the coming months and into 2021.
“Looking ahead, anxiety is likely to remain heightened as the epic fight against the coronavirus pandemic continues. This spells bad news for risk assets (such as oil) which will inevitably remain under pressure,” Stephen Brennock of oil broker, PVM said.
Experts said oil prices were also facing pressure from poor refining margins and large stockpiles.
Brent is on its way to end June with a third straight monthly gain after major producers extended a record 9.7 million barrels per day output cut deal into July while oil demand increased after countries around the world relaxed lockdown measures.
U.S. as well as Canadian energy firms have scaled down the number of oil and natural rigs operating to a new unprecedented low even as higher oil prices lead some producers to start drilling again.
Eugen Weinberg, analyst at Germany’s Commerzbank, said “no massive investments are likely to be made in the foreseeable future given the gigantic mountains of debt and the considerable financial risks.”
U.S. shale oil pioneer, Chesapeake Energy Corp, filed for bankruptcy protection on Sunday as it bowed to heavy debts and the weight of the coronavirus outbreak on energy markets.
Investors will be awaiting economic data this week that will indicate the shape of economic recovery.
Inflation data from the euro zone’s biggest economy, Germany, is expected to be released later on Monday. In the United States, ISM manufacturing index is expected on Wednesday and payrolls on Thursday.