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Home Markets Commodities

Rising COVID-19 cases in world’s biggest economy falter crude oil prices

Olumide Adesina by Olumide Adesina
July 7, 2020
in Commodities
Oil price hits 21-year low as demand and storage crisis persists, Crude oil prices drop as investors assess demand recovery amid supply glut
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Crude oil prices decelerated on Tuesday, pulling back earlier gains recorded at the previous trading session on growing concerns that surging COVID-19 cases in the world’s biggest oil user, the United States, would limit the upside in energy demand.

U.S. West Texas Intermediate (WTI) lost about 0.66%, to trade at $40.46 a barrel at 6.11am local time after surging as high as $40.36 in its intra-day trading session. Brent crude also lost about 0.63%, to trade at $42.83, after hitting an intraday high of $43.19.

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“The potential for demand destruction as lockdown re-instatement looks more likely are combining with concerns about OPEC+ discipline to weigh on oil prices,” CMC Market’s Chief Market Strategist Michael McCarthy said in a note to Reuters.

READ MORE: U.S. dollar share of global currency reserves rose to 61.9% in Q1 2020 – IMF

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, collectively known as OPEC+, are lowering output by 9.7 million barrels per day (bpd) for a third month in July.

Stephen Innes, Chief Global Market Strategist at AxiCorp, in an email to Nairametrics, explained the macros limiting the prospect of oil demand. He said:

“The faltering re-opening of the US States is also partially offset by the muscular approach by Saudi Arabia. They are seeking to enforce compliance with OPEC+ quotas – both are currently important in maintaining market balance and ultimately drawing down global inventories.

READ MORE: Gold nears 8-year high, more economic stimulus coming

“It seems traders are getting more accustomed to minor retracements and rallies than expecting a significant price shift this week as a range trade mentality continues to resonate where Brent $40 per barrel does give the appearance of something of a floor.

“With the market torn between robust cyclical data and rising virus case counts in the Sun Belt, putting in significant headroom above $WTI 40 was also challenged by a possible resumption of US shale production as price move higher. While no less concerning is OPEC+ could roll back cuts in August.”

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In addition, data from the American Petroleum Institute industry group scheduled to come out later today and the U.S. Energy Information Administration data planned to be out tomorrow, are expected to show a 100,000 barrel rise in crude oil stockpiles, six experts polled by Reuters estimated.

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Tags: AxiCorpGlobal Oil pricesOPECOrganization of the Petroleum Exporting CountriesU.S. West Texas Intermediate

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