Oil Drops 3% as Rising Covid-19 Cases Spur Demand Fears
Concerns about renewed coronavirus lockdowns in the United States outweighed signs of a recovery in U.S. gasoline demand on Thursday to keep a lid on oil prices.
The market is also in a holding pattern ahead of a meeting on July 15 of the market monitoring panel of the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
Brent crude futures were down 90 cents, or 2%, at $42.39 per barrel, after gaining 0.5% on Wednesday. West Texas Intermediate crude futures slipped $1.28, or 3.13%, to settle at $39.62 per barrel, after rising 0.7% the previous day.
“Support will disappear after this week as coronavirus cases are surging in several U.S. states,” Tamas Varga at PVM Oil Associates said, adding that a fall in prices was likely.
Data from the U.S. Energy Information Administration showed U.S. gasoline stockpiles fell by 4.8 million barrels last week, much more than analysts expected, as demand hit its highest level since March 20.
But a spike in coronavirus cases across several U.S. states raised the prospect of renewed lockdowns that would likely dent any sustained recovery in fuel demand.
That kept the benchmark crude contracts in tight ranges this week, although holding above $40 a barrel.
U.S. gasoline demand was falling in areas where lockdowns were being reinstated, although on the East Coast, where coronavirus infections were under control, it was recovering well, Lachlan Shaw, head of commodity research at National Australia Bank, said.
The United States reported more than 60,000 new COVID-19 cases on Wednesday, the biggest increase reported by a country in a single day.
Libya, whose ports have been blockaded since January, is trying to resume exports after the state oil firm lifted force majeure at its Es Sider oil terminal on Wednesday. However, a tanker was prevented from entering the port.