Oil prices drop as surging Covid-19 cases raise demand concerns

29 September 2020 (Last Updated September 29th, 2020 10:04)

Oil prices fell as demand concerns persist in the wake of surging Covid-19 cases.

Oil prices drop as surging Covid-19 cases raise demand concerns
Oil prices drop as Covid-19 cases surge world over. Credit: Zbynek Burival on Unsplash.

Oil prices fell as demand concerns persist in the wake of surging Covid-19 cases.

Over one million people have died of Covid-19 across the world as of Tuesday, according to Reuters.

US West Texas Intermediate (WTI) crude CLc1 futures fell by $0.34 to $40.26 a barrel, while Brent crude futures for December LCOc2 dropped by $0.32 to reach at $42.55 a barrel.

The November contract LCOc1, which expires on 30 September, dropped by $0.27 to touch at $42.16 per barrel.

Earlier in the day, the commodities markets grew as Democratic lawmakers unveiled a $2.2tn coronavirus relief bill, which according to US House of Representatives Speaker Nancy Pelosi was considered to be a compromise package.

AxiCorp market strategist Stephen Innes was quoted by the news agency as saying: “If it happens, the US stimulus checks will go a long way to shoring up US oil demand at a most critical juncture and could move oil prices back into a pre-September frame of mind.”

In August, Brent and WTI reached their peak levels since early March on hopes of growing fuel demand and strong compliance along with promised supply cuts by major oil producers. However, since then, prices have dropped by about $3 due to demand concerns.

Investors are expected to look for signs of growth in US demand from American Petroleum Institute data, which will be released today and from the Energy Information Administration, which will be released on 30 September.

Furthermore, investors are also monitoring clashes between Armenia and Azerbaijan over the Nagorno-Karabakh region. If the dispute escalates, oil and gas exports from Azerbaijan are likely to be impacted.