Oil prices slip due to demand concerns

8 September 2020 (Last Updated September 8th, 2020 11:20)

Oil prices have slipped due to concerns that a possible rise in coronavirus cases following the US Labour Day weekend could suppress fuel demand.

Oil prices slip due to demand concerns
Both the WTI and Brent benchmarks are trading at low ranges compared to August prices. Credit: Bear Paw Battlefield.

Oil prices have slipped due to concerns that a possible rise in coronavirus cases following the US Labour Day weekend could suppress fuel demand.

The Labour Day weekend also marks the end of the US summer driving season.

Brent crude LCOc1 fell by $0.08, or 0.2%, to reach $41.93 a barrel while US West Texas Intermediate (WTI) CLc1 futures were down by $0.76, or 1.9%, to reach $39.01 a barrel, Reuters reported.

According to a Reuters analysis, Covid-19 cases rose in 22 of the 50 US states during the holiday weekend due to a number of gatherings.

Meanwhile, cases are also surging in India and Britain.

On 8 September, Brent dropped after Saudi Arabia decided to cut prices for Asian supplies due to tepid fuel demand.

Australia Bank commodity research head Lachlan Shaw was quoted by the news agency as stating: “The combination of coming out of summer peak driving season in the US, which is a seasonal factor, has refocused the market’s attention on whether the demand recovery is strong enough, and clearly there are some doubts, as Aramco’s price move has demonstrated.”

Shaw added that the upcoming maintenance season for the US refineries is also weighing on the market. This could see a reduction in crude demand by 1.5Mbpd to 2Mbpd.

Both the WTI and Brent benchmarks are trading at low ranges compared with the August prices.

Currently, WTI is trading at $40 per barrel, while Brent has dropped from around $45 last month.

ANZ Research said: “This follows on from worrying signs of a resurgence in Covid-19 cases in other parts of the world. This has raised concerns that the recent recovery in demand may be halted as the general public remains cautious about extended travel.”