Oil prices have decreased due to an increasing number of coronavirus (Covid-19) cases and tensions between the US and China, the world’s two biggest economies.
Both instances have prompted investors to opt for investments on safer assets as a result of market uncertainty.
Brent crude dropped $0.14 to reach $43.20 a barrel while the US West Texas Intermediate (WTI) crude reduced by $0.10 to trade at $41.19, reported Reuters.
Markets fell sharply across Asia after China told the US to close one of its consulates in Chengdu, in retaliation to the closure of Beijing’s Houston consulate.
Meanwhile, global Covid-19 cases have exceeded 16 million.
Oil demand has slightly improved from the collapse seen in the second quarter of this year, which subsequently supported prices.
However, the recovery of fuel demand may be tough as the resumption of lockdowns in the US and other nations across the world has limited consumption.
The news agency quoted ING analysts as stating: “Market participants appear to be nervous in taking a strong view either way on the market, with plenty of uncertainty still clouding the outlook when it comes to demand.”
Furthermore, the market is watching out for any impact from Hurricane Hanna, which hit the coast of Texas on 25 July.
The state is already reeling with a surge in Covid-19 deaths.
Oil and gas producers do not expect the storm to affect operations, said Reuters.
According to data from energy services firm Baker Hughes, the operating US oil and gas rig count rose for the first week since March in the week ending 24 July.
ING added: “Whilst we believe rig activity has bottomed, we don’t expect to see a quick recovery anytime soon at current price levels.”
According to the Reuters calculations, oil exports from the western ports of Russia are set to increase by 36% in August from the current month.