Oil prices mixed over tighter supplies and fears of spike in infections
Brent crude edges up while US benchmark WTI futures drop amid rise in American coronavirus cases
Singapore — Oil prices offered up a mixed market snapshot on Monday, with Brent crude edging higher, supported by tighter supplies, while US benchmark WTI futures dropped on concern that a spike in coronavirus cases could curb oil demand in the US.
Brent crude rose 18c, or 0.4%, to $42.98 a barrel by 4.52am after a 4.3% gain last week, while US West Texas Intermediate crude was at $40.42, down 23c, or 0.6%, from its previous settlement on Thursday. US markets were closed on Friday to mark July 4 holiday celebrations.
Amid rising numbers of coronavirus cases in 39 US states, a Reuters tally showed that in the first four days of July alone, 15 states reported record increases in new Covid-19 infections with parties at the holiday weekend possibly leading to another spike.
“There will be some kind of decline in demand if cases were to increase as people will stay at home,” said Howie Lee, an economist at Singapore’s OCBC bank. “The pace of US demand recovery will not be as steep as expected.”
For now, analysts at ING bank said data for several cities in affected states show no significant reduction in road traffic week-on-week.
“We will get a better idea of what impact tighter restrictions in several states have had on gasoline demand with the EIA [Energy Information Administration] report this week,” ING said in a note.
The implied volatility for Brent crude has dropped to the lowest since prices started collapsing in March as some in the market remain focused on tightening supplies as production by Opec fell to its lowest in decades with Russian output dropped to near targeted cuts.
Opec and allies including Russia, collectively known as Opec+, have pledged to slash production by a record 9.7-million barrels per day (bpd) for a third month in July. After July, the cuts are due to taper to 7.7-million bpd until December.
US production, the world’s largest, is also falling. The number of operating US oil and natural gas rigs fell to an all-time low for a ninth week, though the reductions have slowed as higher oil prices prompt some producers to start drilling again.
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