As coronavirus cases increased in the U.S. and some other countries, oil prices dropped in the second session on Monday, partial deadlocks that would lower fuel demand resumed.
Brent crude LCOc1 dropped 81 cents, or 2%, to $40.21 a barrel by 06:53 GMT, while WTI crude CLc1 was at $37.74, down 75 cents, or 2%.
Brent crude oil demand has improved according to major global producers have extended a record 9.7 million bpd barrel supply outage deal till the end of July and mitigated the locking measures implemented by countries around the world. Petrol turned to a quarterly gain prospect.
However, global coronavirus cases exceeded 10 million on Sunday. India and Brazil announced that they are dealing with more than 10,000 cases of epidemics a day. Countries, including China, New Zealand and Australia, reported new incidents, and governments started the lockdowns again.
Other factors limiting the progression of oil prices at this stage can be listed as weak refinery margins, high oil stocks and resumption of US production.
Despite the efforts o the Organization of the Petroleum Exporting Countries (OPEC) and Opec+ and the allies, including Russia to reduce the supply, crude oil inventories in the US, the world’s largest oil producer and consumer, have reached their all-time highs.
Recent price increases have caused some US shale oil producers to reactivate wells.
Although the number of operating oil and natural gas facilities has dropped recordly last week, high oil prices encourage some producers to continue drilling. This opportunity is expected to continue over the next week. Afterwards, the pandemic’s re-spread rate and damage may cause a counter impact.
According to some analysts, looking at the technical prices, Brent crude oil prices find support at $ 39.80 per barrel and WTI at $ 37. Daily closing values below these rates indicate that much deeper regulation is needed in the oil markets.
A deteriorating COVID-19 picture in the US is likely to be the most likely driving force for low prices.