Oil extends losses as coronavirus spike cools demands hopes By Reuters

By Florence Tan

SINGAPORE (Reuters) – Oil prices fell for the second session in a row on Monday as coronavirus cases rose in the United States and elsewhere, prompting some countries to resume partial blockages that could damage fuel demand.

Brent crude () fell 83 cents, or 2%, to $ 40.19 a barrel at 0456 GMT, while US crude () was at $ 37.69, 80 cents, or 2.1%.

Brent crude will end in June with a third consecutive monthly gain after the world’s top producers extended an unprecedented supply cut deal of 9.7 million barrels per day in July, while oil demand improved after countries around the world reduced blocking measures.

However, global coronavirus cases topped 10 million on Sunday when India and Brazil struggled with outbreaks of more than 10,000 cases a day. New outbreaks are reported in countries like China, New Zealand and Australia, prompting governments to impose restrictions again.

“The second wave contagion is alive and well,” said Howie Lee, an economist at OCBC Bank in Singapore. “That is crowning the bullish sentiment that we have seen in the last six to eight weeks.”

Other factors restricting the advance in oil prices at this stage include low refining margins, high oil inventories and the resumption of US production, Lee said.

Despite efforts by OPEC +, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to reduce supplies, inventories of crude oil in the United States, the world’s largest oil producer and consumer , have reached all-time highs. [EIA/S]

“There is also a risk that price gains may recently cause some US shale producers to restart wells,” ANZ analysts said.

Despite the fact that the number of rigs and oil in operation fell to a record low last week, higher oil prices are leading some producers to resume drilling.

“In the next one to two weeks, we should see an increase in rig count in proportion to the pickup in oil production,” said OCBC’s Lee.

Elsewhere, the American oil shale pioneer, Chesapeake Energy Corp (N :), filed for bankruptcy on Sunday due to large debts and the impact of the coronavirus outbreak on energy markets.

The price of Brent crude is backed at $ 39.80 per barrel, while WTI’s support level is at $ 37, said Jeffrey Halley, senior market analyst at OANDA, referring to technical charts.

“A daily close below these points will indicate that there is a much deeper correction in the oil markets,” he said, adding that a deteriorating image of COVID-19 in the United States would be the most likely driver of lower prices.