Oil futures slipped Tuesday, with pressure attributed to mounting tensions between the U.S. and China, as well as a continued rise in COVID-19 infections and expectations major oil producers will agree to begin easing output curbs.
West Texas Intermediate crude for August delivery on the New York Mercantile Exchange was down 47 cents or 1.17% at $39.65 a barrel. September Brent crude, the global benchmark, was up 18 cents or 0.43 % at $43.37 on ICE Europe.
Analysts said the Monday decision by California Gov. Gavin Newsom to reverse the reopening of indoor operations at restaurants, bars, movie theaters and other venues dented sentiment and could make a meeting this week by members of the OPEC+ alliance’s monitoring committee more interesting.
An agreement to cut production by 9.7 million barrels a day is scheduled to give way to cuts of 7.7 million barrels in August. Saudi Arabia and its allies have pushed to stick to that schedule ahead of this week’s meeting, news reports said.
“With the California soft lockdown now framing the picture, July could be an even more challenging month for oil than expected with even more demand woes emanating from coronavirus-linked uncertainty. So, it will be especially necessary for OPEC+ to present a centralized front while addressing these and other issues that may pop up,” said Stephen Innes, global chief market strategist at AxiCorp, in a note.
Meanwhile, the U.S. on Monday announced its formal opposition to a number of Chinese claims in the South China Sea. China on Tuesday described the U.S. rejection of its maritime claims as completely unjustified and as an attempt to stir discord between China and Southeast Asian countries. China also announced it will impose unspecified sanctions on defense contractor Lockheed Martin Corp. after the U.S. approved a possible $620 million deal to supply missile parts to Taiwan, marking the latest in a volley of punitive actions by the superpowers as relations grow colder.