Brent Hits $41 Amidst Fresh COVID-19 Concerns

By Adedapo Adesanya

Brent crude rose to the $41 levels on Tuesday, pushed by traders’ optimism despite concerns about a second wave in coronavirus cases.

The international benchmark crude gained 38 cents or 0.93 percent to trade at $41.18 per barrel, while the US West Texas Intermediate (WTI) crude gained 75 cents or 1.96 percent to settle at $38.94 per barrel.

There have been worries about a resurgence of coronavirus cases in some parts of the US and some European countries which could offset recovering fuel demand.

The market has made improvements from April’s collapse brought by lockdowns to control the pandemic and the prices have hit the $40 per barrel level.

However, analysts say the market may be relying on an overly optimistic view of consumption.

In the case of a second wave of the pandemic, oil demand might plunge back to lockdown levels, which was below $20 per barrel.

However, some see a good outcome for now. Goldman Sachs raised its 2020 forecast for Brent to $40.40 per barrel and WTI to $36 per barrel, but warned that prices are likely to pull back in the coming weeks because of demand uncertainty and inventory builds.

Crude inventories in the US have been growing as the pandemic curbs demand, but were forecast to have declined last week.

The Energy Information Administration (EIA) will release its weekly US petroleum supply data on Wednesday, after the release of the American Petroleum Institute’s (API) figures early on Wednesday.

Also, supporting the market yesterday, Libya said it declared force majeure on some exports from its Sharara oilfield after production was briefly halted by an armed group, just days after output had resumed following a blockade that had lasted months.

Oil had dropped previously despite members of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreeing to extend output cuts because Saudi Arabia, Kuwait and the United Arab Emirates (UAE) said they would not maintain supplemental reductions that amount to more than a million barrels of daily supply.

OPEC, Russia and other producers on Saturday agreed to extend record cuts of 9.7 million barrels per day (bpd) until the end of July.