Futures Movers: U.S. oil prices down 4% as investors fret over new cases of coronavirus

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Oil futures on Monday traded sharply lower as concerns about new cases of coronavirus in parts of the world dimmed optimism about the economic outlook and therefore appetite for crude.

On top of that, oil giant BP PLC warned that the COVID-19 pandemic will have a lasting economic impact, hurting demand for oil and weighing on energy prices. The energy giant also wrote down as much as $17.5 billion of its assets, noting that the public health crisis may force it to leave fallow some of its energy production assets.

“Naturally reports of spikes in new cases in the U.S., China and Japan aren’t helpful for crude price,” wrote Craig Erlam, senior market analyst at Oanda, in a Monday report.

“Oil prices will remain very sensitive to [the] evolving COVID situation, despite the best efforts of producers around the world to rebalance the market,” he wrote.

West Texas Intermediate crude for July delivery CL.1, -1.73% CLN20, -1.73%, the U.S. benchmark, were trading down $1.42 or nearly 4%, at $34.84 a barrel on the New York Mercantile Exchange, after WTI marked a weekly slide of 8.3% on Friday.

Global benchmark Brent oil for August delivery BRNQ20, -0.41% declined $1.07, or 2.8%, at $37.64 a barrel on ICE Futures Europe, following a 8.4% decline last week.

Both Brent and WTI last week posted their first weekly loss in 7 weeks.

China shut down produce market in Beijing after a number of new coronavirus infections, while U.S. states, including Florida, California, and Arizona, among others, were seeing infections increase, raising fresh doubts about reopenings and the path for recovery from countries that are facing a recession due to efforts to limit the spread of the deadly pathogen.

“Any lockdown in Beijing would restart another cycle of economic suppression that will elongate the path to global recovery,” said Mihir Kapadia, chief executive officer of Sun Global Investments.

“Industrial output is a key tracker for oil demand and with significant reductions in the transport sector, only solid industrial recovery can anchor prices,” he said in emailed commentary. “Industrial output in China, the biggest oil importer, rose a second consequent month in May, but the pace was far slower than anticipated.”

That means a post-COVID-19 recovery is “not going to be a V shape. It is going to be far [more] methodical than immediate,” said Kapadia. “Oil has long road ahead and the path is not yet clear.”

Back on Nymex, prices for petroleum products moved lower along with oil. July gasoline RBN20, +1.06% fell 0.7% to $1.1161 a gallon and July heating oil HON20, +1.18% lost nearly 0.1% to $1.1005 a gallon.

July natural gas NGN20, -3.12% traded at $1.693 per million British thermal units, down 2.2%.

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