By Adedapo Adesanya
Oil prices fell on Tuesday amid concerns that the recent surge in coronavirus cases in the United States will limit recovery in fuel demand.
This was because 16 US states have reported record increases in new COVID-19 cases in the first few days of July.
The Brent crude, which rose at the previous session, shed 2 cents or 0.05 percent to trade at $43.08 per barrel, while the US West Texas Intermediate (WTI) crude dropped 21 cents or 0.52 percent to trade at $40.41 per barrel.
According to reports, in the largest crude producing nation, the state of Florida, is reintroducing some limits on economic reopenings to tackle rising cases.
Also, California and Texas, two of the most populous and economically important US states, are reporting high infection rates.
Concerns that this rise in new coronavirus cases will hamper the recovery in fuel demand have weighed on oil prices in recent weeks and will likely continue to do so.
In the US, crude supply had been falling at its quickest pace ever. Weekly output recently fell to 10.5 million barrels a day, down from 13 million barrels in late March, government data showed.
The US crude market also faces some uncertainties from a court decision ordering the shutdown of the Dakota Access pipeline, the biggest artery transporting crude oil from North Dakota’s Bakken shale basin to the Midwest and Gulf Coast regions, due to environmental concerns.
However, this came ahead of expected data on weekly US crude inventories from the trade group, American Petroleum Institute (API) due out on Wednesday morning and also that from the Energy Information Administration (EIA) scheduled later in the day.
Last week’s data showed declines in crude inventories, suggesting the US economy was in recovery mode and oil demand was rebounding.
With recent factors, there are predictions that the market will record a build with the API ahead of its official data estimated a build in crude oil inventories of 2.048 million barrels for the week ending July 3.
On its part, the EIA in its latest Short-Term Energy Outlook (STEs) expects that global oil inventories will continue to decline in the second half of the year and throughout next year.
In addition, it raised its price outlook for Brent crude to $41 per barrel for the second half of 2020, $4 per barrel higher than the forecast last month.
“EIA expects high inventory levels and surplus crude oil production capacity will limit upward price pressures in the coming months, but as inventories decline into 2021, those upward price pressures will increase,” the EIA said in a summary of its monthly report.
Dipo Olowookere