Oil prices fell early on Friday amid surging new coronavirus infections in the United States, which had market participants worried about the U.S. oil demand recovery trend.
As of 9:20 a.m. EDT on Friday, WTI Crude was down 1.28 percent at $40.13, and Brent Crude traded down 1.23 percent at $42.61. Prices recovered somewhat later in the afternoon but were still trading about 1% off.
Oil prices were still headed for a weekly gain this week as low supply from OPEC, encouraging economic data from the U.S. and China, and a drop in U.S. commercial inventories had supported prices earlier this week.
However, the U.S. reported on Thursday its highest level of new daily coronavirus cases so far—at more than 55,000, raising fears that a surge in infections will dent the gradual oil demand recovery in America, which consumers 20 percent of the world’s daily oil supply.
Nearly half of the U.S. states have either paused or rolled back the easing of the restrictions, Texas governor Greg Abbot mandated statewide face-covering in public spaces, while Florida reported more than 10,000 coronavirus cases in a new grim record.
Earlier this week, oil prices rallied after the EIA reported a draw of 7.2 million barrels in crude oil inventories in the United States in the week to June 26, down from an all-time high level of inventories reached the previous week.
A Bloomberg survey of OPEC’s crude oil production in June showed that the cartel’s output fell to a three-decade low of 22.69 million barrels per day (bpd), as Saudi Arabia fulfilled its promise to cut an additional 1 million bpd on top of its quota in the OPEC+ pact.
Apart from tightening supply, oil prices were supported this week by optimistic economic news from the U.S. and China. In the United States, the economy regained 4.8 million jobs last month, data showed on Thursday, which sent equity and oil markets rallying. In China, the manufacturing sector conditions continued to improve in June, the Caixin China General Manufacturing PMI showed, while the Caixin China General Services survey showed on Friday that China’s services sector activity expanded at its fastest pace in a decade and business confidence improved to a three-year high.