Crude Oil Slumps Further Amid Prospect Of Resurgence Of Coronavirus

Oil slumped on Monday, extending last week's losses, as new coronavirus infections hit China, Japan and the United States' increasing concerns that a resurgence of the virus could weigh on the recovery of fuel demand. Brent crude futures fell $1.32, or 3.4 per cent, to $37.41 a barrel by 12:45 pm, while US West Texas Intermediate crude futures were down $1.75, or 4.8 per cent, to $34.51 a barrel. Wider financial markets also dropped on Monday as the reports of a new cluster of coronavirus infections in Beijing raised the risk-off sentiment of investors. The coronavirus pandemic started at the end of last year in the Chinese city of Wuhan.

The oil benchmarks fell about 8 per cent last week, their first weekly declines since April, as US coronavirus cases started increasing. Over the weekend, more than 25,000 new US cases were reported on Saturday alone as more states reported record new infections and hospitalizations.

"Confirmed cases of the virus have continued to rise with increasing number of deaths, reflecting a continuing scenario which would keep global growth and energy demand constrained," said Avtar Sandu, senior manager commodities at Phillips Futures in Singapore. In Japan, there were about 50 new cases reported in Tokyo on Monday, according to local media, which reported 47 on Sunday, then the highest number since early May.

Industrial output in China, the world's biggest crude oil importer, rose for a second consecutive month in May but the rise was smaller than expected, showing that the restoration of the world's second-biggest economy will be choppy. Still, the country's refineries increased their throughput in May by 8.2 per cent more than the same period a year ago to about 13.6 million barrels per day (bpd), government data showed.

An OPEC-led monitoring panel will meet on Thursday to discuss ongoing record production cuts and see whether countries have delivered their share of the reductions, but will not make any decision, according to five OPEC+ sources.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, have been reducing supplies by 9.7 million bpd, about 10% of pre-pandemic demand, and agreed in early June to extend the cuts for a month until end-July.

Iraq, one of the laggards in complying with the curbs, agreed with its major oil companies to cut crude production further in June, Iraqi officials working at the fields told Reuters on Sunday.

The country's oil minister later said it would export an average of 2.8 million bpd in June.