Crude Oil Lower; OPEC Disputes and Virus Cases Weigh

imageCommoditiesJul 03, 2020 06:47AM ET

(C) Reuters.

By Peter Nurse – Oil markets slipped Friday as the resurgence of Covid-19 cases, particularly in the U.S., the largest consumer in the world, threatened the recovery of crude demand.

At 7:30 AM ET (1130 GMT), U.S. crude futures traded 1.2% lower at $40.15 a barrel. The international benchmark Brent contract rose 1.3% to $42.58.

The U.S. has recorded around a quarter of the almost 11 million cases worldwide, according to data from Johns Hopkins University, and the number is growing rapidly.

The U.S. registered over 50,000 news cases Thursday, for the second day in a row, with record numbers of new infections in both Florida and Texas. Many states have decided to delay and in some cases reverse plans to let stores reopen and activities resume, threatening to derail the nascent recovery in demand for crude.

Adding to the pessimism surrounding the market is the worry that the Organisation of Petroleum Exporting Countries and its allies, including Russia, may resume their price war and abandon the phased restoration of supply to the market at the end of this month.

The Wall Street Journal reported earlier this week that Saudi Arabia has threatened to restart the price war that resulted in dramatic falls in the oil price unless fellow OPEC members –mainly Angola and Nigeria–play by the rules regarding production cuts agreed by the cartel.

On Thursday U.S. oil giant Exxon Mobil (NYSE:XOM) also warned of more huge losses to come when it posts its second-quarter results, saying sharply lower crude prices will wipe out billions in operating profit.

Rivals Royal Dutch Shell (LON:RDSa) and BP (NYSE:BP) have already said they’ll massively cut spending and take write downs.

Investors will have to hope that U.S. gasoline demand rises over the July 4 holiday weekend with many families expected to hit the road. Whether this increase in travel will result in a further surge of Covid-19 cases and possibly lockdown measures remains to be seen.

Crude Oil Lower; OPEC Disputes and Virus Cases Weigh

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