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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading nearly flat shortly before the opening on Monday. The markets are being supported by tighter supplies from major producers, but gains are being capped by concerns over a record rise in global coronavirus infections that could stall a recovery in fuel demand.

At 10:53 GMT, August WTI crude oil is trading $39.73, down $0.10 or -0.25 and August Brent crude oil is at $42.11, down $0.08 or -0.19%.

Fuel Demand Worries Rise Along with New COVID-19 Cases

“Infections are rising in key markets around the world and there are valid concerns that the world is in for a prolonged period of dealing with its consequences,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen.

The U.S. reported more than 30,000 new coronavirus cases on Friday and Saturday, the highest daily totals since May 1, according to data compiled by Johns Hopkins University. New cases across the country are surging faster than ever, especially in states in the South, West and Midwest.

Seven states hit record cases on Saturday, including Florida and South Carolina, which had their third consecutive day breaking single-day records. Missouri, Nevada, Montana, Utah and Arizona also hit records.

The coronavirus reproduction rate in Germany jumped to 2.88 on Sunday, up from 1.79 a day earlier, the Robert Koch Institute for public health said. A rate of less than one is needed to gradually contain the disease. Germany has been widely regarded as a success story in Europe in terms of containing the coronavirus. But infections have been rising again.

South Korea on Monday said for the first time that it is in the midst of a ‘second wave’ of the coronavirus. The World Health Organization (WHO) reported a record increase in global cases on Sunday, with the biggest increase from North and South America.

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In Canada and the United States, the number of operating oil and natural gas rigs fell to a record low last week, even as higher oil prices prompt some producers to resume drilling.

Daily Forecast

The OPEC+ production cuts and the reopening of several economies have helped drive price to decent  levels over the past two months, but prices of physical oil have begun to ease, traders and analysts are saying. They point to the reality of poor refinery margins and brimming storage tanks. Furthermore, signs of a second wave COVID-19 cases should lead to increased worries over demand.

“I find it more difficult for oil to move higher at this point, especially with the growing concern about second-wave contagion,” said Howie Lee, an economist at Singapore’s OCBC bank.

For a look at all of today’s economic events, check out our economic calendar.

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