Oil prices drop as increase in Covid-19 cases weigh on fuel demand recovery

22 September 2020 (Last Updated September 22nd, 2020 11:59)

Oil prices dropped as the rising cases of global Covid-19 infections weighed much on the recovery of fuel demand.

Oil prices drop as increase in Covid-19 cases weigh on fuel demand recovery
Crude prices steadied as Texas refineries stayed open as the tropical storm ‘Beta’ was expected to keep losing its strength. Credit: David Seibold via Flickr.

Oil prices dropped as the rising cases of global Covid-19 infections weighed much on the recovery of fuel demand.

Brent crude LCOc1 futures edged lower by $0.03, or 0.1%, to reach at $41.41 a barrel while US West Texas Intermediate crude futures were down by $0.04, or 0.1%, to touch $39.27 a barrel, Reuters reported.

Crude prices, which slipped about 4% on 21 September, steadied as Texas refineries stayed open, with the tropical storm ‘Beta’ losing its intensity.

Singapore-based Vanda Insights energy analyst Vandana Hari was quoted by the news agency as stating: “This week, the market is recalibrating to a likely stalling of the economic recovery in Europe as several countries in the region impose fresh restrictions to contain a surge in the coronavirus.”

A price slump on 21 September was induced over concerns that rising Covid-19 infections in major nations could lead to fresh lockdowns, disrupting fuel demand.

National Australia Bank commodity research head Lachlan Shaw said: “We had a pretty punchy risk-off session (overnight) … on fears around the risk that a Covid resurgence starts to have negative impacts on demand again.”

Investors are tensed about fuel demand in countries such as the UK, where fresh coronavirus-related restrictions are being implemented.

US health officials are also warning of a resurgence of infections in the coming winter season.

Shaw added: “When the virus resurges, governments lockdown, impose restrictions, and individuals and businesses start to retreat. It’s all bad for demand.”

Meanwhile, traders are awaiting data on US oil inventories from the American Petroleum Institute’s, which is due to be released later today.