Oil Prices Fall as Fresh Lockdown Threatens Recovery
By Adedapo Adesanya
Oil prices fell on Friday as concerns about the recovery in fuel demand in the face of coronavirus cases surge continued following fresh lockdown just as major crude-producing nations set to increase output continue to reflect.
The international benchmark, Brent crude, dropped 23 cents or 0.53 per cent to sell at $43.14 per barrel, while the US West Texas Intermediate (WTI) crude lost 16 cents or 0.39 per cent to settle at $40.59 per barrel.
The largest oil-consuming nation, United States, recorded a record 77,000 new coronavirus cases in the last 24 hours, with Florida and Texas reporting the largest one-day increases in virus-related deaths.
Globally, new virus outbreaks continued to happen in Japan to Argentina, triggering new quarantine travel restrictions and business reclosures.
The European Union (EU) extended its travel ban on Americans for another two weeks as the country struggles to bring its outbreak under control.
Also, the U.S. active oil and gas rigs rose by nine to 288 during the week ended July 15, signalling a widely awaited recovery in US upstream sector.
The Organization of the Petroleum Exporting Countries and allied producers led by Russia, known as OPEC+, decided to taper production cuts by 2 million barrels per day to 7.7 million barrels per day beginning August 1 through the end the year.
However, compensation cuts from laggard members Nigeria, Iraq and Angola for August and September could offset some of the production coming back online.
OPEC officials see production increases justified as demand gradually returns from its pandemic’s nadir in April.
Russian Energy Minister, Mr Alexander Novak, sees global oil demand in August to rebound to 10 per cent below the pre-crisis levels but full recovery remains unlikely for at least another year.
Even the fact that crude oil inventories shed 7.5 million barrels in the week to July 10, after a build of 5.7 million barrels reported for the previous week, did nothing to help in the face of the news.
Concern among traders that OPEC+’s plan to ease production restrictions from next month would continue to tip the fundamentals scale towards another oversupply.