Oil prices fell overnight as investors worried about a second wave of coronavirus infections, but new output cuts from Saudi Arabia tempered worries about oversupply and limited price losses.
Brent crude futures lost $US1.37, or 4.4 per cent, to settle at $US29.60 a barrel. US West Texas Intermediate (WTI) crude fell 60 cents, or 2.4 per cent, to settle at $US24.14 a barrel.
Global oil demand has slumped by about 30 per cent as the coronavirus pandemic has curtailed movement across the world, leading to growing inventories globally. While crude futures have fallen more than 55 per cent this year because of the virus, prices have gained the past two weeks, supported by a modest rebound in demand as some travel restrictions are eased.
However, fears about a second wave of the virus weighed on futures.
Germany reported on Monday that new coronavirus infections were accelerating exponentially after early steps to ease its lockdown.
Elsewhere, Wuhan, the epicentre of the outbreak in China, reported its first cluster of infections since the city’s lockdown was lifted a month ago.
South Korea also warned of a second wave of the virus on Sunday.
Prices received a boost earlier in the session after a Saudi energy ministry official said the ministry has directed national oil company Saudi Aramco to reduce its crude production for June by an extra 1 million barrels per day.
“The major positive outcome of these additional cuts is that, according to our calculations, we will now probably avoid global storage tank tops if demand ramps up as expected and new lock-down measures are not imposed,” said Rystad Energy’s senior oil markets analyst Paola Rodriguez Masiu.
The reduction is on top of a pact by the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers – a group known as OPEC+ – to cut production from May 1 by about 10 million bpd in an effort to support prices.
“It’s a balance between OPEC production cuts versus concerns about the possibility of a second wave of coronavirus,” said Phil Flynn, senior analyst at Price Futures Group.
The Kazakh government signed a decree to cut oil output from May onwards in line with a deal agreed last month by the OPEC+ producer group, four sources familiar with the matter told Reuters.
In the United States, fears that the country is running out of oil storage space sent WTI prices into negative territory last month, prompting some US producers to rein in output.
The number of operating oil and gas rigs in the world’s largest oil producer last week fell to 374, a record low according to data going back to 1940 from energy services company Baker Hughes Co.