Oil prices were steady on Monday, supported by tighter supplies from major producers but held in check by concerns over a record rise in coronavirus infections worldwide that could stall a recovery in fuel demand.
Brent crude rose 10 cents, or 0.2%, to $42.29 a barrel by 0826 GMT, while US crude for August delivery was at $39.87 a barrel, up 4 cents, or 0.1%.
South Korea said on Monday for the first time it is in the midst of a ‘second wave’ of the coronavirus. The World Health Organization reported a record increase in global coronavirus 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 following a collapse in April-May during virus shutdowns, as nations worldwide resume economic activity.
Signalling a recovery in global markets and tighter supplies, Brent has moved into backwardation, where oil for immediate delivery costs more than supply later.
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 start drilling again.
The OPEC+ group, consisting of the Organization of the Petroleum Exporting Countries and its allies, including 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.
However, Iraq and Kazakhstan pledged to comply better with oil production cuts during an OPEC+ panel on Thursday.