London — Oil prices fell on Tuesday amid concerns that a surge in coronavirus cases, especially in the US, will hamper any recovery in fuel demand.
Brent crude futures declined by 44c, or 1.02%, to $42.66, by 9.35am GMT, after hitting a high of $43.19. US West Texas Intermediate (WTI) crude futures fell 53c, or 1.30%, to $40.10 a barrel, after a high of $40.79.
“Oil prices are lower today on concerns that the surge in coronavirus cases in the US will limit a recovery in fuel demand,” bank RBC said.
Sixteen US states have reported record increases in new Covid-19 cases in the first five days of July, according to a Reuters tally.
Florida is again introducing some limits on economic reopenings to grapple with rising cases. California and Texas, two of the most populous and economically important US states, are also reporting high infection rates as a percentage of diagnostic tests conducted over the past week.
Other parts of the world, such as Australia, have also been hit by a resurgence in new infections.
Saudi Arabia raised its August crude official selling prices on Monday in a sign it sees demand picking up. But some analysts said the move could weigh on already poor margins for refiners.
“While record output cuts from the Saudis and the rest of [oil cartel and partners] Opec+ support the idea of stronger differentials, this again will not be welcome news for refiners, doing little to help their margins, which are already under significant pressure,” bank ING said.
The US crude market faces some uncertainties from a court decision on Monday ordering the shutdown of the Dakota Access pipeline, the biggest artery transporting crude oil from North Dakota’s Bakken shale basin to the Midwest and Gulf Coast regions, due to environmental concerns.
Market sources in the Bakken said the closure of the 570,000 barrel per day pipeline, while an environmental impact statement is completed, will likely divert some oil flows to transportation by rail.