Oil kept falling after its first weekly drop since late April as a fresh coronavirus outbreak. In China and increases in cases elsewhere added to the concern. The second wave of infections will threaten a nascent economic recovery.
Futures in NY fell below $35 a barrel after losing 8.3% last week. Beijing closed. The city’s largest fruit and vegetable supply center and locked down nearby housing districts over the weekend. After dozens of individuals related to the market tested positive for the virus. Florida, meanwhile, is among some U.S. states that are still seeing sharp increases in cases.
The supply response to the virus continued, with Baker Hughes data show. Active drilling rigs across the U.S. falling for a 13th week to rock bottom in additional than a decade. On the demand side, Chinese official figures showed refinery runs in Asia’s largest economy rose last month. On a year-on-year basis. OPEC and its allies will review the state of the market in the week at a web meeting of the group’s technical committee on Wednesday.
West Texas Intermediate crude
Crude’s six-week rally came to a halt last week amid concerns the worst of the virus isn’t over yet and because the Federal Reserve System warned. The pandemic could inflict lasting damage on the American economy. Still, supply reductions from OPEC+ and therefore the U.S. have begun to bring the market back to balance. Suggesting that a repeat of April’s plunge below zero is unlikely.
“If we do see China get a setback sort of the second wave of infections. The fear is that the remainder of the planet will see another wave also,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia. “Supply cuts are aggressive but as we head toward $40 on Brent. We start potentially building more supply back on U.S. shale.”
West Texas Intermediate crude for July settlement fell 4.7% to $34.55 a barrel on the NY Mercantile Exchange as of 7:48 a.m. in London. it’s lost almost 13% since closing at a three-month high on June 10.
Brent for August delivery declined 3.4% to $37.40 on the ICE Futures Europe exchange after dropping by 8.4% last week.
The pace of recovery in prices is perhaps going to slow because of the steepest decline in supply and therefore the fastest improvement in demand is probably behind the market, Barclays Plc said during a note Friday. The bank increased its 2020 average price estimates for both Brent and WTI by $4 a barrel to $41 and $37, respectively.