Oil falls 2% on U.S.-China tensions, rising virus cases1 min read . Updated: 27 Jul 2020, 10:25 PM IST
- Brent crude lost 1.9%, to $42.53, while West Texas Intermediate crude fell 1.6%, to $40.64 a barrel
- Rising number of global coronavirus cases along with a fall in value of dollar with U.S.-China tensions are severely impacting the oil prices
NEW YORK : Oil prices dropped nearly 2% on Monday despite a weaker U.S. dollar, as rising coronavirus cases and tensions between the United States and China clouded the outlook for oil demand's recovery.
Brent crude lost 81 cents, or 1.9%, to $42.53 a barrel by 11:13 a.m. EDT (1513 GMT), while U.S. West Texas Intermediate (WTI) crude fell 65 cents, or 1.6%, to $40.64 a barrel.
Following the closures of consulates in Houston and Chendu, investors worried about relations between China and the United States and have retreated to safe havens, such as gold and bonds. [ ]
"In lack of larger fundamental news, oil prices are following the overall macro trends, behaving as a 'risky asset' and being traded lower when safe-haven assets strengthen," said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Meanwhile, global cases of the new coronavirus exceeded 16 million, and the virus is surging in areas of the United States.
While oil demand has risen after plunging in the second quarter, reimposed lockdowns because of rising infection rates have made the recovery uneven.
Expectations of U.S. stimulus measures and a weak dollar, which makes dollar-denominated commodities cheaper for holders of other currencies, capped losses.
The U.S. dollar index reached its lowest since June 2018, hurt by deteriorating U.S.-China relations and domestic economic concerns. A weaker dollar is generally supportive for dollar-denominated oil prices.
U.S. Senate Republicans on Monday are expected to unveil a new $1 trillion coronavirus aid package.
"Massive monetary stimulus has bullish implications for oil," analysts from Raymond James said in a note, adding that oil has historically moved upwards with inflation spikes and that the current U.S. money supply increase is unprecedented.
Brent remained on track for a fourth straight monthly gain and WTI was set to rise for a third month as supply cuts from the Organization of the Petroleum Exporting Countries and Russia provided support.
This story has been published from a wire agency feed without modifications to the text.