Oil extends declines over virus resurgence fears

Bloomberg

Oil extended declines after swelling US crude stockpiles and a surge in coronavirus cases across the nation raised concerns about demand in the world’s largest economy.
Futures in New York slipped 2.3% towards $37 a barrel, after the biggest fall in almost two weeks in the previous session. The fear of new lockdowns sent US gasoline futures tumbling by the most in two months.
A dose of pessimism has returned to the oil market in recent days, after a run of gains that dragged prices higher from the depths of the Covid-19 crisis in April and early May. Activity at Indian refineries hasn’t returned to full capacity as demand in many parts of Asia fails to replicate China’s bounce-back. Brent’s prompt timespread has dropped into contango again, a structure that suggests oversupply.
American crude inventories have also risen for three straight weeks. These are making the job much tougher for Opec and its partners as they push ahead with their record production cuts in an attempt to repair the market.
“If the economy doesn’t pick up, that will become a drag on crude oil demand just when OPEC+ has to make a decision about what to do next,” said Ole Hansen, head of commodities strategy at Saxo Bank. There’s a risk of oil dropping further “if cracks should appear in the OPEC+ resolve to keep barrels off the market.”