Oil falls on fears of second coronavirus wave
Oil prices fell as investors worried about a second wave of coronavirus infections, but new output cuts from Saudi Arabia tempered worries about oversupply and limited price losses.
Brent crude futures fell $1.04, or 3.4%, to $29.93 a barrel by 12:58 p.m. EDT (1658 GMT). U.S. West Texas Intermediate (WTI) crude fell 30 cents, or 1.2%, to $24.44 a barrel.
Global oil demand has slumped by about 30% as the coronavirus pandemic has curtailed movement across the world, leading to growing inventories globally. While crude futures have fallen more than 55% this year because of the virus, prices have gained the past two weeks, supported by a modest rebound in demand as some travel restrictions are eased.
However, fears about a second wave of the virus weighed on futures.
Germany reported on Monday that new coronavirus infections were accelerating exponentially after early steps to ease its lockdown. Elsewhere, Wuhan, the epicentre of the outbreak in China, reported its first cluster of infections since the city's lockdown was lifted a month ago.
South Korea also warned of a second wave of the virus on Sunday.
"Traders stepped back from last week's enthusiasm, contemplating the possibility of a second wave of the epidemic, which, if realised, could drive demand lower than the market hopes and expects for the second half of 2020," said Rystad Energy's head of oil markets, Bjornar Tonhaugen.
Prices received a boost, however, after a Saudi energy ministry official said the ministry has directed national oil company Saudi Aramco to reduce its crude oil production for June by an extra 1 million barrels per day.
The reduction is on top of a pact by the Organization of the Petroleum Exporting Countries (OPEC) and allied producers - a group known as OPEC+ - to cut production from May 1 by about 10 million bpd in an effort to support prices.
"It's a balance between OPEC production cuts versus concerns about the possibility of a second wave of coronavirus," said Phil Flynn, senior analyst at Price Futures Group. "It's those two emotions that have been bouncing the market back and forth today."
In the United States, fears that the country is running out of oil storage space sent WTI prices into negative territory last month, prompting some U.S. producers to rein in output.
The number of operating oil and gas rigs in the world's largest oil producer last week fell to 374, a record low according to data going back to 1940 from energy services company Baker Hughes Co.
(Additional reporting by Bozorgmehr Sharafedin in London, Florence Tan in Singapore and Devika Krishna Kumar in New York Editing by Marguerita Choy and Nick Zieminski)
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