SINGAPORE – Oil prices fell on Monday for a second session in a row as coronavirus cases increased in the US and elsewhere, causing some countries to resume partial closures that could affect fuel demand.
Brent crude fell 83 cents or 2% to $ 40.19 a barrel to 0456 GMT while US crude was $ 37.69 a fall of 80 cents or 2.1%.
Brent crude is expected to end with a third consecutive monthly profit in late June after major global producers extended an unprecedented 9.7 million barrel-a-day delivery cut-off agreement until July as oil demand improved as countries around the world lockdown- Measures relaxed.
However, global coronavirus cases surpassed 10 million on Sunday as India and Brazil struggled with over 10,000 outbreaks daily. New outbreaks are reported in countries such as China, New Zealand and Australia, which are causing governments to re-impose restrictions.
“The second wave is alive and well,” said Howie Lee, an economist at OCBC Bank in Singapore. “This will limit the bullish mood we’ve seen in the past six to eight weeks.”
Other factors limiting the rise in oil prices at this stage include poor refinery margins, high oil stocks, and the resumption of US production, Lee said.
Despite efforts by OPEC + – the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia – to reduce supply, crude oil stocks in the United States, the world’s largest oil producer and consumer, have reached an all-time high.
“There is also a risk that recent price increases could cause some US shale producers to restart wells,” said ANZ analysts.
Although the number of oil and gas drilling platforms in operation dropped to a record low last week, higher oil prices are causing some manufacturers to start drilling again.
“Over the next week or two, we should see an increase in the number of oil rigs that corresponds to the recovery in oil production,” said OCBC’s Lee.
Chesapeake Energy Corp, an American shale oil pioneer, filed for bankruptcy protection on Sunday as it bowed to the high debt and coronavirus outbreak impact on energy markets.
Brent crude is supported at $ 39.80 a barrel, while WTI’s support level is $ 37, said Jeffrey Halley, senior market analyst at OANDA, referring to technical charts.
“A daily close below these points will signal that oil markets will be revised much deeper,” he said, adding that a worsening COVID-19 picture in the US would be the most likely driver of lower prices. (Reporting by Florence Tan; editing by Sam Holmes, Kenneth Maxwell and Kim Coghill)
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