U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday amid concerns that a surge in new coronavirus cases, especially in the United States and Australia, may delay the economic recovery and hamper any recovery in fuel demand.
US Virus Spread Could Curb Fuel Demand
With 16 U.S. states reporting record increases in new COVID-19 cases in the first five days of July, according to a Reuters tally, there is mounting concern that public health measures to limit the virus spread will curb fuel demand in the world’s biggest oil consuming country.
Florida is re-introducing some limits on economic reopenings to grapple with rising cases. California and Texas, two of the most populous and economically crucial U.S. states, are also reporting high infection rates as a percentage of diagnostic tests conducted over the past week, Reuters said.
Melbourne Australia Locked Down
Melbourne will be locked down for six weeks after new COVID-19 cases in the state of Victory jumped by 191, the biggest daily increase since the outbreak began. In contrast, Beijing reported no new infections for the first time in nearly a month.
The pace of new cases from Tokyo to Iran and Australia is raising concerns about a fresh virus wave. U.S. infections approached 3 million, while deaths in India rose above 20,000.
New Zealand to Limit Returning Citizens
New Zealand’s government will limit the number of citizens flying home with the national airline to reduce pressure on tis overflowing quarantine facilities.
Bookings for seats on Air New Zealand flights “will be managed in the short-term to ensure the government is able to safely place” arrivals into managed isolation or quarantine, Housing Minister Megan Woods said in a statement Tuesday. Air New Zealand said it has put a three-week hold on new bookings on international services into New Zealand following the government’s request.
The rapid increase in coronavirus cases is not just isolated to the U.S. It’s all over the world and likely to get worse before it gets better. Given the new moves by U.S. states, Australia and New Zealand, fuel demand is likely to be pressured.
Another reason for a new term pullback in prices is the upcoming drop in OPEC production cuts.
OPEC+ has been lowering output by 9.7 million barrels per day (bpd) for a third month in July. However, those cuts are set to taper to 7.7 million bpd starting next month, adding at the same time U.S. fuel demand, especially for gasoline, remains impacted by the COVID-19 outbreak.
Data from the American Petroleum Institute industry group at 20:30 GMT on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday are expected to show a 100,000 barrel rise in gasoline stockpiles, six analysts polled by Reuters estimated.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire