By Low De Wei and Alex Longley
Futures fell by as much as 2.6% in New York. California, one of the largest gasoline-consuming states in America, announced on Monday that it would pull back on reopening efforts, the latest red flag for the return of oil demand. This isn’t just happening in America — Hong Kong imposed its strictest social distancing measures yet and Japan said a new state of emergency is possible if infections increase.
Crude’s drop was part of a broader downward move in markets, as the economic hit of rising virus cases continues to grow. European equity markets extended a global retreat.
An OPEC+ committee meets Wednesday to discuss easing record output curbs that have helped the market recover. The group is expected to stick to its plan of tapering the cuts from August even as the coronavirus rages unabated in many parts of the world. An increase in supply from OPEC+ would hit a global economy that’s still far from pre-virus levels of activity, with a range of indicators in the U.S. suggesting the recovery has slowed in the past few weeks.
“Everybody agrees it’s very early days, it’s not going to be a straight line recovery with the resurgence in cases in the U.S. in particular,” Amrita Sen, chief oil analyst at Energy Aspects said in a Bloomberg TV interview.
The OPEC+ committee will consider whether the alliance should keep 9.6 million barrels of daily output off the market for another month, or taper the cutback to 7.7 million barrels as originally planned. Members are leaning toward the latter, according to several national delegates who asked not to be identified.
Meanwhile, compliance with the existing agreement seems to be improving. Saudi Arabia commended Iraq for implementing almost all of its oil production cuts last month, according to the state-run Saudi Press Agency.
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