Oil futures lost ground Tuesday, seeing pressure as rising COVID-19 cases renewed worries over global economic activity.
West Texas Intermediate crude for September delivery fell 72 cents, or 1.8%, to $40.29 a barrel on the New York Mercantile Exchange, while October Brent crude declined 68 cents, or 1.5%, to $43.47 a barrel on ICE Futures Europe.
The global tally of confirmed cases climbed above 18.3 million on Tuesday, according to data aggregated by Johns Hopkins University, and the death toll rose to 694,406.
However, the number of new U.S. cases of COVID-19 on Monday was below 50,000 for a second day, The Wall Street Journal noted, with some of the most hard-hit states showing a slowdown in infections. Worries about the continued spread of the virus in the U.S. and elsewhere have been seen as a negative for refining margins, which could crimp demand for crude.
India serves as an illustration of the “fragile state of demand,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a Tuesday note. A combination of higher retail prices and lockdown measures that have been extended to the end of the month have served to curtail diesel demand by around 20% year-over-year, they said.
“There remains a distinct possibility of this kind of effect proliferating elsewhere in the region, with more stringent lockdown measures having since been reimposed in parts of the Philippines and Australia, and a higher likelihood that Vietnam will also see some kind of restrictions soon,” they wrote.
The relaxation of curbs on output by OPEC and its allies, a group known as OPEC+, also continue to shadow the market, analysts said. OPEC+ pledged to cut output by 9.7 million barrels a day beginning in May, easing to 7.7 million barrels a day this month and running through the end of the year. Countries that exceeded the earlier curb are supposed to further curtail output, which means output is targeted to rise by around 1.5 million barrels a day beginning this month, though skeptics doubt that past violators of such agreements will fully comply
September natural-gas futures were up 1.2% at $2.127 per million British thermal units. The contract jumped 16% Monday, its largest one-day rise since November 2018 in a move attributed to forecasts for hotter-than-previously-expected weather and tightening production.
September gasoline was off 1.6% at $1.1935 a gallon, while September heating oil declined 1.3% to $1.2257 a gallon.