- Slow Economic Recovery
- Coronavirus Infection Concerns
- Slow Oil Demand Uptick Concerns
Oil prices continue to retreat from three-month highs amidst growing concerns about global economic recovery in the aftermath of the COVID-19 pandemic. Brent crude futures was down 0.12% to $40.65 on Wednesday morning, giving up some of the gains accrued at the start of the year. West Texas Intermediate (WTI) oil futures were down by 1.54% to $38.34 a barrel.
Oil under Pressure
Prices powered through the $40 a barrel level early in the week on OPEC and its allies agreeing to extend production cuts through July. Growing concerns about economic recovery continued to raise concerns as to whether demand will rise to help support prices above the critical support level.
While production cuts have helped trigger an $80 rally in oil prices following a crash to record lows in March, growing concerns about economic recovery continue to fuel a wave of uncertainty in the oil markets. The global economy is yet to fully recover from the coronavirus crisis, raising concerns about whether demand will tick to levels seen before the pandemic.
U.S Oil Stock Piles
Reports that new cases of coronavirus are on the rise in what is believed to be the second wave of infection continues to rattle investors in view of the already fragile demand recovery. Low demand has so far been the biggest tailwind that has kept prices a subdued at lows of $40 a barrel.
Similarly, oil prices edged lower on Wednesday after an industry report in the U.S showed crude and fuel inventories are building up. In the week ended June 5, U.S, crude stockpiles climbed 8.4 million barrels against an expected draw of 1.7 million barrels.
A spike in crude inventory levels signals low demand, a development that should continue to weigh on traders’ sentiments amidst the ongoing openings. Similarly, a second wave of coronavirus infections could plunge oil demand to lockdown levels, conversely push prices lower.