Oil prices fell sharply in Asia on Tuesday, after yet another surge in COVID-19 cases around the world hit at expectations for a rapid economic recovery and exacerbated fears of falling demand.
Adding to the concerns were expectations that the OPEC+ group of producers would start backing away from large production cuts that have been in place for a couple of months.
Brent oil futures traded in London dropped 2.01% to $41.86, while WTI futures slid 2.27% to $39.19.
OPEC+ will meet on Wednesday to discuss whether to keep in place production cuts of 9.6 million barrels per day (bpd) or roll them back, possibly by 2 million bpd.
“The question is, going forward, if you start easing, which they’re going to do, can they keep it together or do they open the floodgates,” Helima Croft, head of global commodities strategy at RBC, told Analyst. “Can you hold discipline within the producer organization?”
“There is a lot of optimism that the market can handle anything that is thrown at it, in terms of COVID,” Analyst said.
Still, the World Health Organization (WHO) sounded the alarm Monday after global COVID-19 cases topped 13 million, rising by a full million in just five days.
Oil ended last week with a big jump, rising more than 2% on Friday after the International Energy Agency revised its 2020 oil demand projections upwards by 400,000 barrels per day.
Later in the day the American Petroleum Institute (API) will issue its own estimate of crude oil supplies in the U.S.