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.
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.
“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.
“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.