Oil prices edged lower on Monday as rising coronavirus cases and tensions between the United States and China pushed investors toward safe-haven assets.
FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone BaseBrent crude LCOc1 dipped 14 cents, or 0.3%, to $43.20 a barrel by 0242 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 dropped to $41.19 a barrel, down 10 cents, or 0.2%.
The fall in oil mirrored moves in broader financial markets in Asia amid concerns about escalating tensions between the world’s two biggest economies following the closures of consulates in Houston and Chengdu. Global coronavirus cases, meanwhile, exceeded 16 million.
Still, Brent is on track for a fourth straight monthly gain in July and WTI is set to rise for a third month as unprecedented supply cuts from the Organization of the Petroleum Countries and its allies including Russia propped up prices. Output has also fallen in the United States.
Oil demand has improved somewhat from the deep trough of the second quarter, supporting prices, although the recovery path is uneven as resumption of lockdowns in the United States and other parts of the world is capping consumption.
“Market participants appear to be nervous in taking a strong view either way on the market, with plenty of uncertainty still clouding the outlook when it comes to demand,” ING analysts said in a note.
Investors are also watching for any impact from storm Hanna, which battered the Texas coast over the weekend, threatening heavy rains in Texas and Mexico. Oil and gas producers and refiners said on Friday that they did not expect the storm to affect operations.
The rebound in oil prices from lows hit earlier this year has also encouraged the world’s top producers to increase output and exports again.
The U.S. oil rig count rose last week for the first week since March after producers added one rig, Baker Hughes data showed, a sign that U.S. oil production decline may have bottomed out.
“Whilst we believe rig activity has bottomed, we don’t expect to see a quick recovery anytime soon at current price levels,” ING said.
Russian oil exports from its western ports are set to rise 36% in August from July, according to the preliminary loading plan and Reuters calculations.
The world’s top exporter Saudi Arabia again topped the chart of crude suppliers to China in June, supplying 2.16 million barrels per day, or nearly 17% of China’s record imports for the month.