Oil fell below $42 a barrel on Tuesday, its 5th session of decline, pressured by concerns that a recovery in demand could weaken as coronavirus infections flare up around the world.
Coronavirus cases rose in 22 of the 50 U.S. states, a Reuters analysis showed on the Labor Day holiday weekend. New infections are also increasing in India and Britain.
Brent crude LCOc1 fell 50 cents, or 1.2%, to $41.51 a barrel at 0818 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 dropped $1.05, or nearly 3%, to $38.72.
On Monday, crude fell after Saudi Arabia’s state oil company Aramco cut the October official selling prices for its Arab light oil, a sign demand may be stuttering.
“The combination of coming out of summer peak driving season in the U.S., which is a seasonal factor, has refocused the market’s attention on whether the demand recovery is strong enough – and clearly there are some doubts, as Aramco’s price move has demonstrated,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
Both oil benchmarks have dropped out of the ranges they were trading in throughout August. Brent has fallen almost 8% since the end of August.
Still, oil has recovered from historic lows hit in April, thanks to a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+. The producers are meeting on Sept. 17 to review the market.
Crude has also found support from a weaker U.S. dollar, although the U.S. currency was up on Tuesday. The market could rally beyond $45 later this year, said Norbert Ruecker, head of economics at Swiss bank Julius Baer.
“Fundamentally, things have not changed,” he said. “Demand is recovering, supply remains constrained, and the storage overhang is slowly disappearing.”