By Adedapo Adesanya
The Brent crude returned to $40 levels on Tuesday despite resurgence of coronavirus in China, the world’s biggest crude importer.
The international benchmark crude gained 94 cents or 2.37 percent to trade at $40.66 per barrel. Also, the US West Texas Intermediate (WTI) crude gained 81 cents or 2.18 percent to settle at $37.93 per barrel.
There have been worries about a resurgence of coronavirus cases in some parts of the United States, China and in some European countries which could offset recovering of fuel demand as cases rose to more than 8 million worldwide.
On Tuesday, Beijing said it was shutting down schools because of the risk of a new wave of infections. A renewed outbreak would jeopardize the recovery in oil prices over the last two months.
The new coronavirus outbreak in Beijing grew to 106 cases on Tuesday, with the Chinese capital going back to lockdown. Health officials confirmed another 27 COVID-19 cases on Tuesday, a smaller increase than in previous days, but still a worrying resurgence after Beijing enjoyed almost two months without a single new infection.
The oil market has made improvements from April’s collapse brought on by lockdowns to control the pandemic and both benchmarks have hit the $40 per barrel level. The gain was spurred by record output cuts and signs that demand was slowly coming back as lockdowns are lifted.
Tuesday’s gain can be attributed to improved figures showing that demand for essentials are picking up. May retail sales revived hopes of a swift post-pandemic economic rebound, with sentiment also lifted by data showing reduced COVID-19 death rates in a trial of a generic steroid drug.
In its monthly report, the International Energy Agency (IEA) forecast oil demand at 91.7 million barrels per day (bpd) in 2020, 500,000 bpd higher than its estimate in May’s report, citing higher than expected consumption during coronavirus lockdowns.
Still, the IEA said a fall in flying because of the virus outbreak meant the world would not return to pre-pandemic demand levels before 2022.
Oil supplies in May plunged by nearly 12 million barrels per day, the IEA said, with the Organization of the Petroleum Exporting Countries and its allies including Russia – known as OPEC+ – reducing their output by 9.4 million barrels per day.
OPEC+ agreed this month to extend production cuts of 9.7 million barrels per day through July. It also called on members that have not been complying to make up commitments with extra cuts later.
