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July 7, 2020

Oil slips over concerns that Covid-19 surge in US will curb demand

Oil prices have edged down due to concerns that an increase in Covid-19 cases in the US will restrict fuel demand recovery in the nation.

By Himaja Ganta

Oil prices have edged down due to concerns that an increase in Covid-19 cases in the US will restrict fuel demand recovery in the nation.

Brent crude futures fell $0.19, or 0.4%, at $42.91 a barrel, while US West Texas Intermediate (WTI) crude futures were down $0.17, or 0.4%, to $40.46 per barrel, Reuters reported.

According to a Reuters tally, 16 US states reported a record high rise in new Covid-19 infections in the first five days of this month.

This mounted concerns that public health measures or initiatives to contain the spread of the virus will curb fuel demand.

CMC Markets Sydney chief market strategist Michael McCarthy was quoted by the news agency as saying: “The potential for demand destruction as lockdown reinstatement looks more likely are combining with concerns about OPEC+ discipline to weigh on oil prices.”

The Organization of the Petroleum Exporting Countries (OPEC), Russia and allies, together known as OPEC+, has been reducing supply by approximately 9.7 million barrels per day (Mbpd) since 1 May.

Earlier last month, the group also agreed to extend output cuts until the end of this month.

Beginning next month, the cuts are due to taper to 7.7Mbpd until the end of this year.

ANZ said in a note: “Summer driving demand in the US is low, keeping gasoline demand subdued, and a reintroduction of lockdowns is a major headwind.”

According to six analysts polled by Reuters, data from the industry groups American Petroleum Institute (API) and the US Energy Information Administration (EIA) is expected to highlight a 100,000 barrel rise in gasoline stocks.

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