Oil prices slip due to surge in Covid-19 infections

28 September 2020 (Last Updated September 28th, 2020 11:16)

Oil prices have edged-down due to concerns over the impact on fuel demand recovery as a result of increasing cases of Covid-19 infections.

Oil prices slip due to surge in Covid-19 infections
According to Baker Hughes data, the US oil and gas rig count increased for a second week in a row. Credit: skeeze from Pixabay.

Oil prices have edged-down due to concerns over the impact on fuel demand recovery as a result of increasing cases of Covid-19 infections.

Brent crude LCOc1 futures edged lower by $0.37 to $41.55 a barrel while US West Texas Intermediate crude futures were down by $0.39 to settle at $39.86 a barrel, Reuters reported.

ANZ analysts said: “New Covid-19 case numbers are accelerating in major US states, renewing fears of mobility restrictions challenging the ongoing oil demand recovery in the last quarter.”

On 28 September, Russian Energy Minister Alexander Novak said that the global oil market has been stable for the past few months and reported a restoration in the demand-supply balance.

However, Novak warned of risks associated with a second wave of coronavirus infections.

Organization of the Petroleum Exporting Countries (OPEC) producers Iran and Libya are exporting more crude despite efforts of OPEC+ (OPEC and its allies) to limit output.

According to Baker Hughes data, the US oil and gas rig count increased for a second week in a row. Currently, the number of oil rigs in the US increased by four to 183 in the week that ended on 25 September.

Commercial oil inventories in Organisation for Economic Co-operation and Development (OECD)-countries are expected to stand a little above the five-year average in Q1-2021, prior to falling below that range for the remaining part of the year, OPEC secretary-general Mohammad Barkindo said.

Furthermore, clashes between Armenian and Azerbaijani forces over a disputed region entered the second day on 28 September, reigniting worries about stability in the South Caucasus, a region that provides crucial transit routes for gas and oil to the international market.

The US Commodity Futures Trading Commission (CFTC) said that financial firms raised their net long US crude futures in the week ending 22 September.

ING analysts said: “The bulk of the buying that was seen over the week was driven by short-covering, with the gross short position falling by a little over 20,000 lots.”