Oil prices sink as fears of second wave dent rising fuel demand
Global oil prices slipped back today amid rising fears that a second wave of coronavirus cases will strike just as oil producers begin to bring more output back onstream.
US benchmark West Texas Intermediate fell 1.6 per cent to $40.60, while global standard Brent crude dropped back 1.1 per cent to $43.66.
Numbers of cases are now growing fast around the world, with new lockdown restrictions denting fuel demand around the world.
Oil producer cartel Opec last month agreed to reduce production curbs from 9.7m barrels per day to 8.5m barrels per day from August to December.
The decision was predicated on the fact that the world’s economies were beginning to open up after months of lockdown.
Rystad Energy’s senior oil markets analyst Paola Rodriguez-Masiu said that prices would be bounce back and forth as the month went on.
“August will be a month of some price volatility”, she said. “With demand recovery stalling for a while amid Covid-19’s resurgence, supply indications will swing oil trading from gains to losses and back.
“Tuesday’s oil prices are falling as news from Asia and Europe are adding up concerns that the infection crisis may now not be just limited to the US and Brazil, but also to the rest of the world via a second wave.
“Populous cities across Eastern Asia and Australia are putting up new restrictions amid a surge in infections. The cruise ship industry’s oil demand is also expected to take a hit, with the first such signs coming from Norway”, she added.
According to the Economist Intelligence Unit, global demand for oil will recover to around 94m barrels per day in the third quarter.
That’s up around 13 per cent from Q2, as the gradual easing of Covid-19 restrictions boosts economic activity and therefore energy demand.