Oil prices dropped on Tuesday amid concerns that the increase in coronavirus incidents in the US, the world’s largest oil consumer, would limit the recovery in fuel demand.
West Texas Intermediate (WTI) crude CLc1 futures fell 54 cents, or 1.3%, to $40.09 a barrel at 0703 GMT, well off an earlier high of $40.79.
Brent crude LCOc1 futures declined by 56 cents, or 1.3%, to $42.54, after hitting an intraday high of $43.19.
16 US states reported record increases in the first five days of July in new COVID-19 cases. There are concerns that possible public health measures to limit virus spread will reduce fuel demand.
Diagnostic tests last week in Florida, California, and Texas report a high percentage of infections. It is debated to re-apply some restrictions on economic flexibilities.
Organization of Petroleum Exporting Countries (OPEC) and the other producers known as OPEC +, including Russia, have reduced a third monthly production by 9.7 million barrels (bpd) per day in July. However, as the potential for a demand disruption is coupled with concerns about the OPEC + discipline, it seems likely to re-apply the restrictions.
However, these cuts will decrease to 7.7 million bpd from next month. At the same time, US fuel demand, especially gasoline, will continue to be affected by the outbreak of COVID-19. Vehicle traffic demand is low in summer fuel demand, dropping the demand for gasoline, and the increasing virus cases is troubling.