Oil prices were steady on Monday, supported by tighter supplies from major producers but held in check by concerns over a record rise in global coronavirus infections that could stall a recovery in fuel demand.
Brent crude LCOc1 rose 5 cents, or 0.1%, to $42.24 a barrel by 0941 GMT. U.S. crude CLc1 was down 10 cents, or 0.2%, at $39.65.
South Korea on Monday said for the first time that it is in the midst of a ‘second wave’ of the coronavirus. The World Health Organization reported a record increase in global cases on Sunday, with the biggest increase from North and South America.
“Infections are rising in key markets around the world and there are valid concerns that the world is in for a prolonged period of dealing with its consequences,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen.
Oil prices have been supported by a recovery in fuel demand globally as nations resume economic activity after coronavirus lockdowns.
Signalling a recovery in global markets and tighter supplies, Brent has moved into backwardation, where oil for immediate delivery costs more than supply later. LCOc1-LCOc2
Both contracts rose about 9% last week. However, after weeks of rising, prices of physical oil have begun to ease, traders and analysts say, as the rally succumbs to the reality of poor refinery margins and brimming storage tanks.
“I find it more difficult for oil to move higher at this point, especially with the growing concern about second-wave contagion,” said Howie Lee, an economist at Singapore’s OCBC Bank.
In Canada and the United States, the number of operating oil and natural gas rigs fell to a record low last week, even as higher oil prices prompt some producers to resume drilling.
The OPEC+ group, consisting of the Organization of the Petroleum Exporting Countries and allies such as Russia, has yet to decide whether to extend a record supply cut of 9.7 million barrels per day (bpd) for a fourth month in August.
Russia sees between $40 and $50 to the barrel as a fair and balanced oil price, Deputy Energy Minister Pavel Sorokin said.