Oil prices edge lower as COVID-19 lockdown concerns overshadow demand prospects

By Reuters

Oil prices slipped for a second straight session on Monday as renewed COVID-19 lockdowns raised fresh concerns about global fuel demand. A crude oil tanker is seen at Qingdao Port, Shandong province, China, April 21, 2019. [Reuters]

Brent crude futures for March fell 8 cents, or 0.1 per cent, to USD55.38 a barrel by 0717 GMT, while U.S. West Texas Intermediate crude for March was at USD52.26 a barrel, down 1 cent.

“Signs of weaker demand weighed on the market,” ANZ analysts said, pointing to lockdowns in Hong Kong, China and possibly France as COVID-19 cases rise, restricting business activity and fuel consumption.

China reported a climb in new COVID-19 cases on Monday, casting a pall over demand prospects in the world’s largest energy consumer, the main pillar of strength for global oil consumption.

Last Friday prices came under further pressure after data from the U.S. Energy Information Administration showed U.S. crude inventories surprisingly rose by 4.4 million barrels in the week to Jan. 15, versus expectations for a draw of 1.2 million barrels.

The number of oil and natural gas rigs added by U.S. energy firms rose for a ninth week in a row in the week to Jan. 22, but are still 52 per cent below this time last year, data from Baker Hughes showed.

The rig count is expected to rebound further in the weeks ahead as producers maximise output ahead of spring, according to Stephen Schork, editor of oil market newsletter editor The Schork Report.

Some support for prices has come in recent weeks from additional production cuts from the world’s top exporter, Saudi Arabia. But investors are watching for a resumption of talks between the United States and Iran on a nuclear accord - which could see Washington lifting sanctions on Tehran’s oil exports, boosting supply.

Iran’s oil minister said on Friday the country’s oil exports have climbed in recent months and its sales of petroleum products to foreign buyers reached record highs despite U.S. sanctions.

On Sunday, Indonesia said its coast guard had seized the Iranian-flagged MT Horse and the Panamanian-flagged MT Freya vessels over suspected illegal fuel transfers off the country’s waters.