Oil extended declines toward $40 a barrel as concerns about demand linger with the coronavirus raging across many regions.
Infections flared by a record in Hong Kong, and Los Angeles is on the brink of another stay-at-home order. New cases have accelerated in California, although the pace of deaths slowed in Arizona and Florida. Crude in New York fell 0.7 per cent on Monday, after slipping 1.5 per cent in the previous two sessions.
In another warning sign for the oil market, Chinese demand is cooling off. A rebound in consumption in the Asian giant helped drive crude higher, but the price of physical oil barrels traded in Asia has slipped with the country’s buying spree slowing in recent weeks.
“The stalling oil demand recovery story is not helping,” said Giovanni Staunovo, a commodities analyst at UBS Group AG. “The virus continues to remain a demand concern until a vaccine is found.”
Crude has been stuck in a tight range this month after rebounding sharply from a plunge below zero in April. There are wide-ranging concerns as the pandemic is accelerating again in parts of the world and threatening demand, while OPEC+ is preparing to ease its record supply cuts starting next month. But, Russia is signalling that it’s serious about using any extra supply locally and won’t send it to key refining markets like northwest Europe.
- West Texas Intermediate for August delivery, which expires Tuesday, lost 28 cents to $40.31 a barrel as of 8:18 a.m. in New York
- The more-active September futures dropped 29 cents to $40.46
- Brent for September settlement slid 0.7 per cent to $42.85, after slipping 0.5 per cent on Friday
While Russia’s export plan is still not finalized, shipments of Urals crude in August are likely to be broadly in line with this month’s levels, according to people familiar with the matter. That would be consistent with a loading plan for the first five days of August, and comments from Energy Minister Alexander Novak that increased oil production is going to be used internally.
Meanwhile, oil explorers in the U.S. last week extended a record streak of rig retirements that commenced four months ago with a Saudi-Russian price war and the virus-driven demand collapse.
© 2020 Bloomberg L.P.