MELBOURNE/SINGAPORE: Oil prices fell on Tuesday amid concerns over fuel demand as the peak U.S. driving season drew to a close and the U.S. Labor Day long weekend added to worries over rising coronavirus cases in more U.S. states.
Coronavirus cases rose in 22 of the 50 U.S. states, a Reuters analysis showed, on the holiday weekend traditionally filled with gatherings to mark the end of summer. At the same time cases are flaring up in India and Britain.
U.S. West Texas Intermediate (WTI) crude futures fell $1.07, or nearly 3%, to $38.70 per barrel at 0635 GMT, playing catch-up with a drop in Brent prices overnight.
Brent crude futures eased 15 cents, or 0.4%, to $41.86 a barrel, after falling 1.5% on Monday.
Brent dropped on Monday after Saudi Arabia’s Aramco, the world’s top oil exporter, cut the October official selling prices for its Arab light crude, seen as a sign demand growth may be stuttering as COVID-19 cases flare up around the world.
“The combination of coming out of summer peak driving season in the U.S., which is a seasonal factor, has refocused the market’s attention on whether the demand recovery is strong enough – and clearly there are some doubts, as Aramco’s price move has demonstrated,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
Also weighing on the market is the upcoming maintenance season for U.S. refineries, which could cut crude demand by 1.5 million to 2 million barrels per day, he said.
WTI and Brent have dropped out of the ranges they were in throughout August, with WTI now below $40 after having traded around $42 for most of the month. Brent has dropped from around $45. The market had been helped by a weaker U.S. dollar, which has since rebounded slightly.
“This follows on from worrying signs of a resurgence in COVID-19 cases in other parts of the world. This has raised concerns that the recent recovery in demand may be halted as the general public remains cautious about extended travel,” ANZ Research said.
A stronger dollar also weighed broadly on commodities as this makes the greenback-priced oil more expensive to global buyers.
A day after thin holiday trade, the greenback was slightly stronger against a basket of currencies and firmed marginally against the euro.
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