Oil prices plunged on as investors are concerned about the second wave of coronavirus infections, but Saudi Arabia ‘s latest production cuts eased worries about oversupply and definite price losses.
Brent crude futures fell $1.04, or 3.4pc, to $29.93 a barrel by 12:58 p.m. EDT (1658 GMT). US West Texas Intermediate (WTI) crude fell 30 cents, or 1.2pc, to $24.44 a barrel.
Global demand for oil has shrunk by around 30%, as the coronavirus pandemic has curtailed worldwide travel, leading to increasing global inventories.
While crude potentials have dropped more than 55pc this year due to the novel coronavirus, prices have risen over the past two weeks, helped by a moderate demand boost as some travel restrictions are eased.
In a recent report, Germany said that the virus is spreading exponentially after easing the lockdown. Elsewhere, Wuhan, China’s epicenter of the epidemic, announced its first infection cluster since the city’s lockdown was lifted a month ago.
Rystad Energy’s head of oil markets, Bjornar Tonhaugen said, “Traders stepped back from last week’s enthusiasm, contemplating the possibility of a second wave of the epidemic, which, if realized, could drive demand lower than the market hopes and expects for the second half of 2020.”
Prices have been increased, however, after an official from the Saudi energy ministry said the ministry had ordered the national oil company Saudi Aramco to reduce its crude oil output by an additional 1 million barrels per day for June.
Phil Flynn, a senior analyst at Price Futures Group said, “It’s a balance between OPEC production cuts versus concerns about the possibility of a second wave of coronavirus. It’s those two emotions that have been bouncing the market back and forth today.”
Last week, the number of operating oil and gas plants in the world’s largest oil producer dropped to 374, a record low from energy services firm Baker Hughes Co. dating back to 1940.