Oil falls as infections rise, eyes on EU recovery plan

Oil prices fell on Monday as coronavirus cases increased in many countries, though cautious investor optimism about a potential Covid-19 vaccine and ongoing talks over a European Union fund to revive economies hit by the pandemic curbed losses.

Brent crude LCOc1 was down $0.32, or 0.7%, at $42.82 per barrel by 1339 GMT, while the US West Texas Intermediate (WTI) CLc1 slipped $0.29, or 0.7%, to $40.30.

“As things stand, prices are not likely to produce any sizeable gains very soon, until a signal that the pandemic is slowing down,” said Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen.

“Even though in Europe the virus has been cornered, the Americas and some Asian states still have a long way to go.”

More than 14.5 million people have been infected by the novel coronavirus globally and more than 604,000 have died of Covid-19, the disease caused by the pathogen, according to a Reuters’ tally.

Prices found some support after German biotech firm BioNTech and US drugmaker Pfizer reported additional data from their experimental Covid-19 vaccine that showed it was safe and induced an immune response in patients.

Investors are also looking to the EU summit for trading cues, with leaders showing first signs of compromise over carving up a proposed €750-billion ($858.3-billion) recovery fund to revive economies.

Japan’s oil imports fell 14.7% in June from the same month a year earlier, official figures showed on Monday. The drop was not as pronounced as in May, when they fell 25% year-on-year.

Also underscoring the impact of the virus, Japan’s exports plunged 26.2% in June from a year earlier, ministry of finance data showed on Monday.

While fuel demand has recovered from a 30% drop in April after many countries imposed strict lockdowns, consumption is still below pre-pandemic levels. US retail gasoline demand is falling again as infections rise.

“We recognise that further improvements in demand will be difficult to achieve, but also do not expect a return to April and May lows,” JBC said in a note.

Rising tension between China and the United States also put pressure on prices.

China’s embassy in Myanmar on Sunday accused the United States of “outrageously smearing” the country and driving a wedge between it and its Southeast Asian neighbours over the contested South China Sea and Hong Kong.

Saudi Arabia’s 84-year-old ruler, King Salman bin Abdulaziz, has been admitted to hospital, suffering from inflammation of the gall bladder. The king has ruled the world’s largest crude oil exporter and close US ally since 2015.