Oil prices drop as surge in Covid-19 weighs on fuel demand

30 July 2020 (Last Updated July 31st, 2020 14:34)

Oil prices have dropped over concerns that surge in cases of Covid-19 infections could threaten fuel demand recovery.

Oil prices drop as surge in Covid-19 weighs on fuel demand
According to EIA data, crude inventories were down by 10.6 million barrels in the week that ended on 24 July. Credit: Markus Trienke via Flickr.

Oil prices have dropped over concerns that surge in cases of Covid-19 infections could threaten fuel demand recovery.

The Brent crude contract for October fell by $0.02, or 0.05%, to $44.07 a barrel at 05:55 GMT while the September Brent contract, which is to expire on 31 July, in light trading saw a drop of $0.07 to $43.68, reported Reuters.

Meanwhile, the US West Texas Intermediate (WTI) crude futures fell five cents to $41.22 a barrel.

On 29 July, both the benchmarks rose after data provided by the US Energy Information Administration (EIA) reported the biggest decline in crude inventories since last December.

According to EIA data, crude inventories were down by 10.6 million barrels to settle at 526 million barrels in the week that ended on 24 July.

OANDA senior market analyst Jeffrey Halley was quoted by the news agency as saying: “Oil should have done much better after the massive fall in US crude inventories of over ten million barrels, as well as the tailwinds from a generally much weaker US dollar.

“It may well be that oil markets are pricing in a higher risk of an economic downturn in the US and places elsewhere due to Covid-19.”

The country is one of the worst affected by the pandemic, reporting the highest number of confirmed Covid-19 infections in the world.

As of 29 July, deaths from the virus have surpassed 150,000 in the US.

On 30 July, Australia recorded daily highs in new infections.

The potential impact on demand comes just as the OPEC+ is set to boost production in August by adding around 1.5 million barrels a day to the global supply.