Oil prices fell in early trade on Tuesday on concerns about fuel demand growth as a fresh wave of COVID-19 infections around the world sparks tighter lockdowns just as major producers ramp up output.
US West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.5% to $40.79 a barrel at 0132 GMT, while Brent crude futures fell 27 cents, or 0.6% to $43.88 a barrel.
The slide comes after WTI rose 1.8% and Brent climbed 1.5% on Monday on better-than-expected data on manufacturing activity in Asia, Europe and the United States showing factories were emerging from the worst of the early coronavirus pandemic impact.
Denting fuel demand, cities from Manila to Melbourne are tightening lockdowns to battle new infections, while Norway has stopped cruise ship traffic in the latest European travel alarm.
In a further sign of a patchy rebound in demand, analysts estimate US refined product stockpiles rose last week, according to a preliminary Reuters poll ahead of data due from the American Petroleum Institute industry group later on Tuesday and the US government on Wednesday.
At the same time producers in the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, are stepping up output this month, adding around 1.5 million barrels a day of supply. US producers also plan to restart shut-in production and inventories remain near historical highs.
“So it’s tough to see, in my view, conviction emerging to the upside,” NAB’s Shaw said. “There could be heightened risk of prices moving to the downside in the very near term.”