Brent crude lost about 1.6%, to trade at $40.28 a barrel at 5.02 am, Nigerian time, while the U.S. was crude down by 1.87% to trade at $37.77.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke about oil traders’ capped bullish sentiments. He said:
“Oil bulls started to curb their enthusiasm last week after the resurgence on Covid-19 in the most populous US states.
“And indeed, the run of the news flow could test the market resolve that Brent $40/barrel is giving the appearance of something of a floor.
“Last week, investors may have been too eager to take the previous week’s US production decline as good news. They then found themselves holding the bag as inventories put in a hefty build.”
New cases of COVID-19 outbreaks are reported in areas that include Australia, New Zealand, and China, prompting fiscal authorities to impose restrictions again.
“The second wave contagion is alive and well,” Howie Lee, an economist at Singapore’s OCBC bank said to Reuters. “That is capping the bullish sentiment that we’ve seen in the last six to eight weeks.”
Other factors restricting oil prices’ advance at this stage include poor refining margins, high oil inventories, and the resumption of U.S. production, Lee said.
However, Brent crude is set to end the month of June with a third consecutive monthly gain, after major global players of crude oil extended a whopping 9.7 million barrels per day output cut agreement into next month.