Jitters over rising pandemic’s threat to fuel recovery weigh on oil

Tokyo — Oil prices fell on Monday, unnerved by the prospect that a recovery in fuel demand could be derailed by a rise in the pace of coronavirus infections worldwide.

Brent crude was down 25c, or 0.6%, at $42.89 a barrel by 5.53am, after dropping slightly last week. US oil was off 22c, or 0.5%, at $40.37 a barrel, after gaining 4c last week.

More than 14.5-million people have been infected by the novel coronavirus globally and more than 604,000 have died of Covid-19, the disease caused by the pathogen.

“The risks of a second Covid-19 torpedo to world growth grow increasingly likely by the day,” said Jeffrey Halley, senior market analyst at Oanda.

While fuel demand has recovered from a 30% drop in April after countries worldwide imposed strict lockdowns, usage is still below pre-pandemic levels. US retail fuel demand is falling again as infections rise.

Japan’s oil imports fell 14.7 % in June from the same month a year earlier, official figures showed on Monday. The drop was not as pronounced as in May when they fell 25%, year on year.

Still, exports from the world’s third-largest economy slumped by double-digits for the fourth consecutive month as the coronavirus pandemic took a heavy toll on global demand.

In the US, energy drillers cut the number of oil and natural gas rigs operating to a record for an 11th consecutive week, data showed on Friday.

The market largely shrugged of the news that Saudi Arabia’s 84-year-old ruler, King Salman bin Abdulaziz, has been admitted to hospital, suffering from inflammation of the gallbladder.

The king has ruled the world’s largest crude oil exporter and close US ally since 2015. Saudi Arabia has been leading efforts to cut production since the coronavirus outbreak evaporated demand for fuel.

Reuters