Oil Price Trembles as Corona Virus Cases Hit Global High
…Countries resumes partial lockdowns
International oil prices slid for a second straight session yesterday as Corona virus cases rose in the United States and other places, leading some countries to resume partial lockdowns that could hurt fuel demand. But Nigeria announced the suspension of the siege on interstate transportation, even while keeping the citizens locked up from 10pm to 4am.
Reports said Brent crude dropped 83 cents, or two per cent, to $40.19 a barrel by 0456 GMT, while U.S. crude was at $37.69, down 80 cents, or 2.1 per cent. Brent crude is set to end June with a third consecutive monthly gain after major global producers extended an unprecedented 9.7 million barrels per day supply cut agreement into July, while oil demand improved after countries across the globe eased lockdown measures.
Report on the global pandemic, as at Sunday indicated that global Corona virus cases exceeded 10 million as India and Brazil battled frightening outbreaks of over 10,000 cases daily. New outbreaks are reported in countries including China, New Zealand and Australia, and Nigeria prompting their governments to impose restrictions again.
“The second wave contagion is alive and well,’’ Howie Lee, an economist at Singapore’s OCBC bank, was quoted b an online agency. “That is capping the bullish sentiment that we’ve seen in the last six to eight weeks.’’ Other factors restricting oil prices’ advance at this stage include poor refining margins, high oil inventories and the resumption of the U.S. production, Lee said.
Despite efforts by OPEC+, which represent the Organisation of the Petroleum Exporting countries (OPEC) and allies including Russia, to reduce supplies, crude inventories in the U.S., the world’s largest oil consumer, have hit all-time highs. “There is also a risk that gains in prices recently could see some U.S. shale producers, restart wells,’’ ANZ analysts said.
Even as the number of operating oil and natural gas rigs dropped to a record low last week, higher oil prices are prompting some producers to resume drilling. “In the next one-two weeks, we should see an uptick in rig count commensurate with the pick-up in oil production,’’ OCBC’s Lee said.
Elsewhere, U.S. shale oil pioneer, Chesapeake Energy Corp, filed for bankruptcy protection on Sunday as it bowed to heavy debts and the impact of coronavirus outbreak on energy markets. The Brent crude price is supported at $39.80 a barrel while WTI’s support level is at $37, OANDA Senior Market Analyst, Jeffrey Halley, said, referring to technical charts.
“A daily close below these points will signal that a much deeper correction is upon oil markets,’’ he said. Halley added that a deteriorating COVID-19 picture in the U.S. would be the most likely driver of lower prices.
Chibisi Ohakah, Abuja