By Adedapo Adesanya
Oil prices dropped over 2 percent on Thursday after renewed fears over coronavirus induced lockdowns in the United States outweighed signs of increased demand.
The international benchmark, Brent crude, dropped 94 cents or 2.17 percent to sell at $42.35 per barrel, while the US West Texas Intermediate crude lost $1.28 or 2.35 percent to settle at $39.63 per barrel.
The market sentiment had been positive as investors had banked on economic data as a pointer, but the support ceased as coronavirus cases continue to surge in several US states.
The rise in cases raised the prospect of renewed lockdowns that would likely dent any sustained recovery in fuel demand.
The United States reported more than 60,000 new COVID-19 cases on Wednesday, the biggest increase reported by a country in a single day and this led to a fall in demand of the product in areas where lockdowns were being reinstated, but in cities where coronavirus infections were under control, data showed that demand was recovering well.
The reduction in the supply of crude oil has continued to support the market as producers, under the umbrella body of the Organization of the Petroleum Exporting Countries (OPEC), have continued to comply with the agreement.
OPEC and other producers including Russia, collectively known as OPEC+, had agreed to lower output by a record 9.7 million barrels per day for a third month in July, although there have not been talks on if this will be extended for another month in August.
The market will get to know this soon as members of the group’s market monitoring panel meet on July 15.
An OPEC member, Libya, whose ports had been blockaded since January, has said it will resume exports after its state oil company lifted force majeure at its Es Sider oil terminal. This is set to add to the quantity of oil being put on the market, a move that signifies more problems especially as cuts might soon start reducing.
