By Adedapo Adesanya
Crude oil prices might struggle to keep the upward momentum for a third consecutive week on renewed COVID-19 fears.
The market had been faced with oversupply and lower demand for some weeks due to the global health challenge.
The market has only just been making a recovery as a result of the gradual opening of the global economy and for the first time in more than six weeks, Brent crude rallied and held the $30 level.
The Brent Crude rose above $30 per barrel for the first time since April 15 to sell as high as $31.35 on Thursday.
Also, the West Texas Intermediate (WTI) crude rose by more than 20 percent to sell last week at $27.50 level.
The gains happened as traders’ optimism for the market was moved by decisions of several major economies to ease coronavirus lockdowns, allowing for greater economic activity which in turn boosted demand for oil.
However, the market may face volatility this week as questions are being raised particularly about the 9.7 million barrels per day production cut signed by the Organisation for the Petroleum Exporting Countries and their allies (OPEC+) last month, but took effect on the first day of this month.
Reports say that one of OPEC’s founders, Iraq, is yet to inform its regular oil buyers of cut to its exports, suggesting it is struggling to fully implement the deal.
Other worries are the effect the agreement will have on oil dependent economies like Nigeria and Angola.
Others such as Saudi Arabia, Kuwait and the United Arab Emirates, including Oman, have informed their customers of reduction to their exports.
Despite the slash in the output, the oil market is still under pressure from oversupply and this might weaken the market more since demand has taken as much as 30 million barrels per day hit as oversupplied conditions remain in place.
Analysts believe that crude demand will not return to normal levels until 2022 as the market will need to recover from the impact of COVID-19.
Fears that oil storage capacity will be overwhelmed despite the heavy production cut will continue to weigh on the maket.
Recently, there have been renewed worries about second-wave infections and this has hit the market early on Monday morning.
Chinese authorities reported on Sunday what could be the start of a new wave of cases in the northeast of the country, with South Korea also concerned about the same.
Meanwhile, in Europe, infections are accelerating in Germany after the rolling back of behavioural restrictions.
Reacting to this, the major futures such as the Brent dropped 3.33 percent to trade at $29.94 per barrel, while the WTI was down by 3.48 percent to $23.88 per barrel.
Modupe Gbadeyanka