Oil falls as demand set to fall amid new virus business restrictions
Opec+ is expected to endorse easing of supply cuts despite some US states, Australia and parts of Asia move back into lockdowns
London — Oil prices fell on Tuesday on worries that new restrictions to stem surging US and Asian coronavirus cases could threaten a recovery in fuel demand just as oil cartel Opec and its oil-producing allies, Opec+ prepare to increase output from August.
Brent crude futures fell 44c to $42.28 a barrel by 8.40am GMT and US West Texas Intermediate (WTI) crude futures slid 53c to $39.57.
The governor of California, the US’s most populous state, has ordered bars to shut and restaurants, movie theatres, zoos and museums to cease indoor operations as Covid-19 cases soared.
California’s moves follow the recent reinstatement of some restrictions in other states, such as Florida and Texas. New restrictions were also introduced in Asia and Australia.
On the supply side, markets are keenly awaiting news from Opec+, on the next level of production cuts. Opec’s joint technical committee meets on Tuesday, with the joint ministerial monitoring committee due to meet on Wednesday.
Under the existing supply pact, Opec+ is set to taper its record production cut of 9.7-million barrels per day (bpd) to 7.7-million bpd from August to end-December.
The oil market is moving closer to balance as demand gradually rises, Opec’s secretary-general said on Monday.
China’s June crude oil imports hit both daily and monthly highs, data showed on Tuesday.
However, Citi analysts said that the looming supply increase could weigh on prices given demand uncertainties. Morgan Stanley said oil demand is unlikely to exceed pre-coronavirus levels until late 2021.
The market will also be watching for fuel consumption data due on Tuesday from the American Petroleum Institute (API) industry group and on Wednesday from the US Energy Information Administration (EIA).
Analysts estimate that US petrol stockpiles fell by 900,000 barrels and crude oil inventories by 2.3-million barrels in the week to July 10, a preliminary Reuters poll showed.