Oil prices inch down on signs of scarce global demand

Shafaq News / Oil prices edged down by 8% on Thursday, as fears resurfaced from a drop in demand, due to Covid-19's caseload surge; while the US crude oil reserve is registering an unprecedented record.

Covid-19 cases in the United States of America surpassed the threshold of the million on Wednesday, according to Reuters. The rate of infections slightly increased, after five weeks of decline. Even though the majority of the states have eased restrictions that have curbed demand, fuel consumption remains 20% short. The US Federal Reserve has expressed concerns about the continuation of this situation, which will consequently limit the demand.

Brent crude forward contracts dropped by $ 3.18, or 7.6 percent, to settle at 38.55$ for the barrel. Similarly, US West Texas Intermediate crude dropped by 3.26 dollars, or 8.2 percent, to close at 36.34 dollars for the barrel. Both crudes registered their worst daily losses since April 21 and 27, respectively.

This weakness extended to other asset classes. Stock markets fell, with the S & P 500 went down by 4%, while US Treasury bonds rose.

In the few recent weeks, Crude oil contracts values rose partially, as the governments eased the curfew measures, sparking optimism about a recovering demand. In Asia and Europe, where the measures in some countries were tighter, the demand recovered with a higher momentum.
"The reality is that we have a glut in global fuel market...The fundamentals elements is still marred by what drives prices down, but the market was turning a blind eye," said Jane McGillian, the president of market research at Tradition Energy