Oil slid more than 3% towards $40 a barrel on Tuesday, its 5th session of decline, pressured by concerns that a recovery in demand could weaken as coronavirus infections flare up around the world.
FILE PHOTO: Oil pumps are seen, as oil and gas activity dips in the Eagle Ford Shale oil field due to the coronavirus disease (COVID-19) pandemic and the drop in demand for oil globally, in Karnes County, Texas, U.S., May 18, 2020. Picture taken May 18, 2020. REUTERS/Jennifer Hiller/File Photo
Coronavirus cases rose in 22 of the 50 U.S. states, a Reuters analysis showed on the Labor Day holiday weekend. New infections are also increasing in India and Britain.
Brent crude LCOc1 fell $1.43, or 3.4%, to $40.58 a barrel at 1127 GMT, and earlier slipped to $40.55, the lowest since June 29. U.S. West Texas Intermediate (WTI) crude CLc1 dropped $2.06, or over 5%, to $37.71.
On Monday, crude fell after Saudi Arabia’s state oil company Aramco cut the October official selling prices for its Arab light oil, a sign demand may be stuttering.
“The price weakness is continuing today,” said Eugen Weinberg, analyst at Commerzbank. “We believe this is attributable first and foremost to demand concerns.”
Both oil benchmarks have dropped out of the ranges they were trading in throughout August. Brent has fallen more than 10% since the end of August.
“The streak of losses is driven by a stalling crude demand outlook for the rest of the year,” said Paola Rodriguez-Masiu, analyst at Rystad Energy.
Still, oil has recovered from historic lows hit in April, thanks to a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+. The producers are meeting on Sept. 17 to review the market.
Crude has also found support from a weaker U.S. dollar, although the U.S. currency was up on Tuesday. The market could rally beyond $45 later this year, said Norbert Ruecker, head of economics at Swiss bank Julius Baer.
“Fundamentally, things have not changed,” he said. “Demand is recovering, supply remains constrained, and the storage overhang is slowly disappearing.”
– Reuters