Oil prices dip on demand worries as California reimposes restrictions

Marco Green
July 3, 2020

As of writing, the barrel of West Texas Intermediate was down 0.53% on the day at $39.60. "Both contracts are coming under stronger pressure this morning as the spectre of lockdowns returns", said JBC Energy. New U.S. COVID-19 cases rose by more than 50,000 on Thursday, setting a record for a third consecutive day, according to a Reuters tally.

Brent crude rose 76 cents, or 1.8 per cent, to settle at US$42.03 a barrel.

California, meanwhile, rolled back efforts to reopen its economy, banning indoor restaurant dining in much of the state, closing bars and beefing up enforcement of social distancing and other measures.

Analysts highlighted worries about the spike in cases in heavily populated USA sun-belt states, which are among the country's biggest consumers of gasoline.

Oil prices rose almost 2% on Wednesday following a drawdown in US crude inventories from record highs and a string of positive manufacturing data, but a surge in coronavirus cases tempered gains.

"The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic's progress threatens to derail this recovery", ANZ Research said in a note.

USA crude inventories USOILC=ECI fell more than expected, dropping by 7.2 million barrels last week, after hitting all-time highs for three consecutive weeks, Energy Information Administration data showed.

"The oil "perma bulls" continue to buy the dips as their optimism stems from the fact that global demand is unambiguously on the rise", AxiCorp global market strategist Stephen Innes said in a note. USA manufacturing activity rebounded in June, hitting its highest level in more than a year as the broader economy reopened.

All eyes will be on driving activity in the United States over the upcoming July 4th holiday weekend and how quickly US producers revive shut-in production, analysts said.

However, Nigerians are kicking against the policy, saying it was ill-timed.

A surge in new infections in the United States has anxious some investors, but most are betting this will not be enough to derail a broader rebound in the global economy.

Other reports by Click Lancashire

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