The prices of oil have continued to fall as demand slowed due to the fear of second wave of Coronavirus. U.S commercial oil inventories data on Wednesday came out at 5.7 million barrels.
A high inventory intensifies the fear that demand for oil oil is yet to recover, despite the reopening of the economy in several countries around the world.
As cases of covid-19 continue to increase globally including in the U.S, investors are standing on the fence as fear of another lockdown as a result of second wave of infections sets in.
U.S oil futures Western Texas Intermediate (WTI) is trading at $35.83 per barrel. Brent crude is trading at $38.20 per barrel,
Western Canadian Select (WCS) is trading at $27.22 per barrel. It traded as allow as $26.80 at one point on Thursday.
Nigeria banner oil Bonny light closed at $39.77 per barrel.
Naeem Aslam, chief market analyst at Avatrade said: “Oil is down because of two major reasons. First is a fear of a second wave of coronavirus which raises the odds of another lockdown and slower reopening of the economy.”
He said the fact that US crude oil inventories have risen brings into question how quickly demand for oil can recover, particularly if the US and other countries face the spectre of longer lockdowns.
Mele Kyari, Group managing director of Nigerian National Petroleum Corporation and OPEC National Representative during a halftime talk on Wednesday with Gulf intelligence said
“The temporary shift in prices that we have seen recently in the last couple of days, in the last 10 days to be specific is indicative of some response to the cut and some response to the increased demand that we have seen in the market.”
“My thoughts are that is actually more driven by sentiment than by demand because we haven’t seen that significant rise in demand. And of course, even the cuts as you are aware, there are many failures in achieving 100% conformity in the cuts.”
“Which means that the volume that are supposed to get out of that market are still there and therefore the price rise that we saw, that significant jump appears very very cosmetic to me.” And I see that if we don’t contain the supply, we could still slide back to the early March price.”
In April, U.S oil (WTI) and Canadian oil (WCS) witnessed its greatest fall in history when it traded at negative prices up to minus $40 per barrel due to limited storage capacity as majority of the countries around the were under some sort of lockdown.
Oil prices had rallied back in May, as lockdown restriction are being eased, in addition to the OPEC+ unanimously agreeing to extend 9.7 mb/d oil production cut till end of July.