After registering some gains at the start of July 27’s trading session, the oil prices made U-turn and dropped as increasing COVID-19 cases in most countries and reduced commercial flights raised fears about oil demand recovery.
The oil price had surged earlier on Monday on the back of another major stimulus expected in the United States and a weaker US dollar. Nevertheless, by 10:00 a.m. EDT, WTI Crude was trading down 0.85 percent at $40.97. On the other hand, Brent Crude prices were also down 0.92% on the day trading at $42.95.
Resurging COVID-19 cases in Spain made the United Kingdom to re-impose self-isolation for travelers from Spain on July 26. Some of the countries, including Spain, were considering localized lockdowns.
The growing US-China tensions with the shutdown of consulates in Chengdu and Houston were also affecting oil prices negatively. Investors sought haven assets and gold exploded to record highs.
Additional stoking fears of oil demand recovery was data coming from the global flight tracking service Flightradar24. That data showed that “After increasing for 12 straight weeks, the rise in global commercial traffic has stalled.”
The worst floods in decades have hit China along the Yangtze River. These floods might threaten industrial output recovery after the health crisis. The South China Morning Post states that the Yangtze River Basin generates almost 50% of China’s gross domestic product (GDP).
Google is expected to tell its employees to work from home until July 2021. That is a significant sign that oil demand for commuting to work daily may not recover to the pre-crisis levels. On Monday, The Wall Street Journal reported on the Google plan citing individuals with knowledge of the matter.
This Work From Home plan will be valid for about all of Google’s 200,000 contract and full-time employees at parent Alphabet Inc. The move might prompt other tech giants and firms from other industries to increase their work from home schedules and let their employees work permanently from home. In turn, oil price recovery will be subdued.