Wednesday 17 June 2020 12:46 pm

Oil prices begin slide over coronavirus second wave fears

Global oil prices slipped back this morning on rising fears over a second wave of coronavirus infections after an outbreak in Beijing.

Worldwide benchmark Brent crude fell 1.5 per cent over the morning’s trading, slipping back to $40.34.

Read more: BP to write off up to $17.5bn after oil price crash

Meanwhile US standard West Texas Intermediate, which was recently trading close to $40 levels, dropped 1.8 per cent to fall to $37.68.

However, the drops were cushioned by a combination of optimism around the potential of a new steroid treatment for the disease and rumours of a $1 trillion intervention from president Donald Trump to prop up the US’ infrastructure.

In the Chinese capital, schools were closed yesterday in an attempt to prevent the spread of a second wave, while many commercial flights in and out of the city have been cancelled.

Edward Moya of Oanda said: “China’s second wave of the coronavirus cancelled more than 1,200 flights and will likely see harsher restrictions to prevent the outbreak from spreading further outside of Beijing.  

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“China seems they have a handle on the second wave, but the immediate hit with economic activity and travel will keep prices heavy”.

However, after a clinical trial from researchers at Oxford University found that common steroid dexamethasone reduced the death rate in patients with severe coronavirus by a third, some lingering optimism prevented prices plunging.

UBS analyst Giovanni Staunovo said that prices were currently caught between opposing forces.

He said: “Positive risk sentiment as gauged by rising equity markets driven by aggressive monetary and fiscal stimulus measures which keeps supporting oil prices as well, on the other hand a potential second wave of infections weighing on oil demand”.

Rystad Energy’s head of oil markets Bjornar Tonhaugen said that traders should expect prices to hover around the $40 mark for the rest of June.

Read more: Oil prices set for biggest fall in two weeks after Fed outlook spooks traders

“Having prices around the $40 mark, with marginal moves to either direction should be expected for the rest of June. 

“A daily decline or rise, if marginal, does not mean much now and it’s just a result of market forces trying to sell fear and buy enthusiasm. But we don’t expect it to be anything else than a gentle constant bounce”, he added.