Early on Tuesday, oil prices fell after posting a rise on Monday as the market is concerned about the new wave of coronavirus infections globally which could prompt lockdowns and hit demand just as top producers strengthened output.
At 01.32 GMT, Brent crude oil futures slipped by 0.6% or 27 cents to USD43.88/barrel while the US WTI posted a 0.5% loss or 22 cents to USD40.79/barrel.
The contractions followed Monday’s rise of WTI by 1.8% and Brent by 1.5% due to the positive reading on manufacturing activity in Asia, Europe, and the US. Yesterday, the market was slightly optimistic that global factories were improving from the impact of the pandemic.
However, the resurging cases of coronavirus in a variety of regions have stared to prompt tightening societal and economic activities and raised concerns over oil demand recovery. In the latest developments, Manila and Melbourne have already imposed stricter lockdowns.
Further weighing the demand outlook is the prediction of an increase in US refined product inventories for the week ended July 31. A preliminary US poll ahead of data from the American Petroleum Institute (API) later on Tuesday and the US government on Wednesday predicted US gasoline stocks climbed by 600,000 barrels while distillate inventories grew by 800,000 barrels.
Moreover, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) is scheduled to enhance oil production starting August and adds roughly 1.5 million bpd of supply.
Many US producers also already have plans to restart their halted production while the inventories maintained close to historical highs.
Economist Lachlan Shaw of National Australia Bank (NAB) commented, “There could be heightened risk of prices moving to the downside in the very near term.”
