Oil falls as virus infections rise, eyes on EU recovery plan

Oil prices fell on Monday as coronavirus cases increased in many countries across the globe, but investors remained cautiously optimistic about ongoing talks over a European Union recovery fund to revive economies affected by the pandemic.

Brent crude LCOc1 was down 35 cents, or 0.8%, at $42.79 per barrel by 1121 GMT, while U.S. West Texas Intermediate (WTI) CLc1 slipped 36 cents, or 0.9%, to $40.23.

“As things stand, prices are not likely to produce any sizeable gains very soon, until a signal that the pandemic slows down,” said Rystad Energy’s head of oil markets Bjornar Tonhaugen.

“Even though in Europe the virus has been cornered, the Americas and some Asian states still have a long way to go.”

More than 14.5 million people have been infected by the novel coronavirus globally and more than 604,000 have died of COVID-19, the disease caused by the pathogen, according to a Reuters tally.

Investors are looking to the EU summit for trading cues, with leaders showing the first signs of compromise over carving up a proposed 750 billion euro ($858.3 billion) recovery fund to revive economies.

Japan’s oil imports fell 14.7% in June from the same month a year earlier, official figures showed on Monday. The drop was not as pronounced as in May, when they fell 25% year on year.

Also underscoring the impact of the virus, Japan’s exports plunged 26.2% in June from a year earlier, ministry of finance data showed on Monday.

While fuel demand has recovered from a 30% drop in April after many countries imposed strict lockdowns, usage is still below pre-pandemic levels. U.S. retail gasoline demand is falling again as infections rise.

“We recognise that further improvements in demand will be difficult to achieve, but also do not expect a return to April and May lows,” JBC said in a note.

Rising tension between China and the United States also put pressure on prices.

China’s embassy in Myanmar on Sunday accused the United States of “outrageously smearing” the country and driving a wedge between it and its Southeast Asian neighbours over the contested South China Sea and Hong Kong.

Saudi Arabia’s 84-year-old ruler, King Salman bin Abdulaziz, has been admitted to hospital, suffering from inflammation of the gall bladder. The king has ruled the world’s largest crude oil exporter and close U.S. ally since 2015.