Oil slips on rise in coronavirus cases and US-China standoff

Oil prices edged lower on Monday as rising coronavirus cases and tensions between the US and China pushed investors towards safe-haven assets.

Brent crude dipped 14c, or 0.3%, to $43.20 a barrel by 4.42am, while US West Texas Intermediate (WTI) crude dropped to $41.19 a barrel, down 10c, or 0.2%.

The fall in oil mirrored moves in broader financial markets in Asia amid concerns about escalating tensions between the world’s two biggest economies after the closures of consulates in Houston and Chengdu. Global coronavirus cases, meanwhile, exceeded 16-million.

Still, Brent is on track for a fourth consecutive monthly gain in July and WTI is set to rise for a third month as unprecedented supply cuts from Opec and its allies including Russia propped up prices. Output has also fallen in the US.

Oil demand has improved somewhat from the deep trough of the second quarter, supporting prices, though the recovery path is uneven as resumption of lockdowns in the US and other parts of the world is capping consumption.

“Market participants appear to be nervous in taking a strong view either way on the market, with plenty of uncertainty still clouding the outlook when it comes to demand,” ING analysts said in a note.

Investors are also watching for any impact from storm Hanna, which battered the Texas coast at the weekend, threatening heavy rains in Texas and Mexico. Oil and gas producers and refiners said on Friday that they do not expect the storm to affect operations.

The rebound in oil prices from lows hit earlier this year has also encouraged the world’s top producers to increase output and exports again.

The US oil rig count rose last week for the first week since March after producers added one rig, Baker Hughes data showed, a sign that US oil production decline may have bottomed out.

“While we believe rig activity has bottomed, we don’t expect to see a quick recovery soon at current price levels,” ING said.

Russian oil exports from its western ports are set to rise 36% in August from July, according to the preliminary loading plan and Reuters calculations.

The world’s top exporter, Saudi Arabia, again topped the chart of crude suppliers to China in June, supplying 2.16-million barrels per day, or nearly 17% of China’s record imports for the month. — Reuters