Brent crude futures dropped 0.70%, to sell at $40.40 a barrel today at 4.54 am local time. The Crude oil international benchmark contract lost about 25 cents yesterday.
Strengthening concerns about global energy demand increased momentum after a surge in COVID-19 caseloads around the world led China to postpone flights and close schools.
In addition, a surge in U.S. crude inventories to a record high in two weeks, dampened oil traders’ bullish sentiments even though the U.S government data showed stockpiles for distillate and gasoline dropped.
Understanding Brent Crude; Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil of about two-thirds of the world’s traded crude oil including Nigeria’s crude.
“People are concerned about the coronavirus resurging in China and crude stockpiles rising,” said Lachlan Shaw, head of commodity research at National Australia Bank.
Consequently, to tackle weakened oil demand, OPEC and its major allies agreed to a record supply cut that started last month, while Nigeria and other major oil-producing countries pledged to produce less crude oil, in other to support crude oil prices. OPEC said these cuts were already serving its purpose.
“The oil market was strongly supported by a reduction of the global crude oil surplus, thanks mainly to the historic voluntary production adjustment agreement,” OPEC said, adding it saw a “gradual recovery” in demand until the end of the year.