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June 16, 2020

Oil falls as Covid-19 increases concern over dip in fuel demand

Oil prices have edged-down as new Covid-19 infections across the world raised lingering concerns over stemming of the fuel demand.

By Himaja Ganta

Oil prices have edged-down as new Covid-19 infections across the world raised lingering concerns over stemming of the fuel demand.

Brent crude was down by $0.20 or 0.5% to reach $39.52 a barrel, while US West Texas Intermediate (WTI) crude futures were down $0.21 or 0.6%, to touch at $36.91 per barrel, Reuters reported.

Global cases of the novel coronavirus reached over eight million on 15 June, as infections surge in Latin America.

Meanwhile, the US and China are dealing with fresh Covid-19 infections.

AxiCorp global markets strategist chief Stephen Innes was quoted by the news agency as saying: “While the run of COVID-19 headlines emphasise that a demand recovery is likely to be a slow process, it seems unlikely that we see a return to the lockdown measures of 1H.”

According to analysts, hopes of supply cuts by major producers also helped prevent sharp drop in prices.

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OANDA senior market analyst Edward Moya said: “Renewed optimism that OPEC+ production cuts could remain in place if we see second-wave (coronavirus) concerns intensify have oil prices refusing to enter freefall.”

The Organization of the Petroleum Exporting Countries (OPEC), including Russia and other producers, together known as OPEC+, have been curbing supply by approximately 9.7 million bpd since 1 May as agreed in April.

Earlier this month, the group also agreed to extend output cuts until the end of next month.

Data from the US Energy Information Administration (EIA) showed that oil output from seven major shale formations is expected to decline by about 91, 000 barrels per day (bpd) to about 7.63 million bpd by next month.

According to data from Baker Hughes, energy companies in the US reduced the number of oil rigs operating last week. The number of oil rigs in operation fell below 200 in the week.

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