Oil prices drop on fuel demand worries as coronavirus flares up

By Sonali Paul
MELBOURNE, Aug 4 (Reuters) - Oil prices fell in early trade
on Tuesday on concerns about fuel demand growth as a fresh wave
of COVID-19 infections around the world sparks tighter lockdowns
just as major producers ramp up output.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
22 cents, or 0.5% to $40.79 a barrel at 0132 GMT, while Brent
crude LCOc1 futures fell 27 cents, or 0.6% to $43.88 a barrel.
The slide comes after WTI rose 1.8% and Brent climbed 1.5%
on Monday on better-than-expected data on manufacturing activity
in Asia, Europe and the United States showing factories were
emerging from the worst of the early coronavirus pandemic
impact. "On the demand side, we had quite encouraging global
manufacturing (data) ... but there's still quite a bit of
evidence of the oil demand recovery stalling in quite a few
markets with a resurgence of COVID-19," said Lachlan Shaw, head
of commodity research at National Australia Bank (NAB).
Denting fuel demand, cities from Manila to Melbourne are
tightening lockdowns to battle new infections, while Norway has
stopped cruise ship traffic in the latest European travel alarm.
In a further sign of a patchy rebound in demand, analysts
estimate U.S. refined product stockpiles rose last week,
according to a preliminary Reuters poll ahead of data due from
the American Petroleum Institute industry group later on Tuesday
and the U.S. government on Wednesday.
Five analysts estimated, on average, that U.S. inventories
of gasoline rose by 600,000 barrels. Distillate stockpiles,
which include diesel and heating oil, likely grew by 800,000
barrels, while crude stocks fell by 3.3 million barrels in the
week to July 31. At the same time producers in the Organization of the
Petroleum Exporting Countries (OPEC) and its allies, together
known as OPEC+, are stepping up output this month, adding around
1.5 million barrels a day of supply. U.S. producers also plan to
restart shut-in production and inventories remain near
historical highs.
"So it's tough to see, in my view, conviction emerging to
the upside," NAB's Shaw said. "There could be heightened risk of
prices moving to the downside in the very near term."