Oil shifted down after reporting its first weekly back-to-back rise since February as traders weighed tentative signs of demand recovery from a massive global surplus and the hazard of a revival in virus outbreaks.
Futures in New York dropped by 0.5 per cent following a 25 per cent rise last week. While death rates in many countries have been easing, there is fear that the global economy could be vulnerable to a second wave of infections.
Over the weekend, China locked down a city near North Korea, while the White House was hit with a case even as President Donald Trump encourages Americans to return to work.
Brent crude fell 29 cents, or 0.9 per cent, at US$30.68 a barrel while US oil dropped 26 cents, or 1.1 per cent, to US$24.48 per barrel. Global oil demand has plunged by about 30 per cent as the ongoing global health crisis curtailed movement across the world.
Oil companies are dealing with a series of obstacles as a result of the sudden retreat in demand, Haseeb Ahmed, oil and gas analyst at Global Data, disclosed in a note.
Over the past two weeks, the benchmark has notched up gains as countries have relaxed business and social lockdowns to cope with the coronavirus, and fuel demand has modestly rebounded. Oil production is declining worldwide, too.
Yet potential signs of a second wave of coronavirus infections in northeastern China and South Korea alarmed investors as more countries began pivoting to loosen pandemic restrictions in campaigns that could boost oil demand.
Goldman Sachs analysts said there is still concern that demand will remain low in 2021, with concerns about a second wave of COVID-19 cases and only a small rise in personal or corporate travel.
The market does, however, give some signs that it is starting to rebalance. China's oil stockpiles sagged after expanding to record in recent weeks, while hedge funds lifted their bullish bets on West Texas Intermediate crude.
U.S. output cuts are accelerating with active drill rigs falling to a level not seen since the beginning of the last decade before the shale revolution boomed.
This year, after global demand plummeted amid lockdowns to curb the spread of the coronavirus pandemic, oil is still down about 60 per cent. Restrictions are being slowly alleviated in some places around the world, offering some hope that fuel consumption may recover as people travel again, but low prices are still a major issue.
Anxieties of the US running out of storage capacity have caused last month's WTI prices collapsing into negative zone, prompting some U.S. producers to cut production.
