Singapore — 0200 GMT: Crude oil futures were trading lower in mid-morning trade in Asia June 29 after a surge in new coronavirus cases across the US clouded the demand outlook.
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At 10 am Singapore time (0200 GMT), ICE Brent August crude futures were down 58 cents/b (1.41%) from the June 26 settle at $40.44/b, while the NYMEX August light sweet crude contract was 53 cents/b (1.38%) lower at $37.96/b.
The number of new coronavirus cases in the US surged to a fresh record high late last week, prompting several states to delay reopening plans or re-shutter businesses to slow the pandemic. Texas governor George Abbott and Florida governor Ron DeSantis issued orders June 26 closing bars in a bid to slow the explosive growth of the virus in those states.
"The continued spread of the virus remains one of the most significant downside risks to the economic outlook, as about 30%-50% of GDP comes from countries that have seen worsening COVID-19 trends," Stephen Innes, chief global markets analyst at AxiCorp, said in a note June 29.
More than 10 million cases have now been recorded globally, with the US recording the highest number, accounting for around 25% of the total, according to media reports.
On the supply front, the closely watched Baker Hughes US oil and gas rig count ticked one lower to 265 in weekly data released June 26. The drop offered a somewhat bullish counterpoint to Enervus data released June 25 that showed the weekly US oil rig count rising for the first time since February.
Concerns that resurgent demand and higher prices could spur US producers to resume production and provide more downward pressure on crude prices in the short term have been realized, market sources said.
"The US increased its oil production for the first time in 14 weeks. Crude oil production in the US rose from 10.5 mbpd in the week of June 12 to 11 mbpd in the week of June 19, in a sign that prices are now healthy enough to encourage the return of marginal producers," OCBC analysts said in a note June 29.
Meanwhile, S&P Global Platts Analytics estimates that US gasoline and distillate demand have both bottomed out and will likely improve in the months ahead. They forecast US gasoline demand to rise to 8.8 million b/d by December, averaging 8.1 million b/d in 2020 and down from 9.3 million b/d in 2019, while US distillate demand is likely to average 3.9 million b/d in 2020, down from 4.1 million b/d in 2019.