Oil extends decline as demand worries mount

Oil futures fell again on Wednesday after a sharp slide in the previous session, as a rebound in COVID-19 cases in some countries undermined hopes for a steady recovery in global demand.

Brent crude was down 19 cents, or 0.5%, at $39.59 a barrel by 0656 GMT after dropping more than 5% on Tuesday to fall below $40 a barrel for the first time since June. US crude was down 24 cents, or 0.7%, at $36.52 a barrel, having fallen nearly 8% in the previous session.

Both major oil benchmarks are trading at around three-month lows.

The global health crisis continues to flare unabated with coronavirus cases rising in India, Great Britain, Spain and several parts of the United States. 

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The outbreaks are threatening to slow a global economic recovery and reduce demand for fuels from aviation gas to diesel.

"Given the severity of the move lower, I cannot rule out another large capitulation move," said Jeffrey Halley, senior market analyst at OANDA.

Record supply cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+ have helped support prices, but with grim economic figures being reported almost daily, the outlook for demand for oil remains bleak.

China's factory gate prices fell for a seventh straight month in August although at the slowest annual pace since March, suggesting industries in the world's second-biggest economy continued their recovery from the coronavirus-induced downturn.

Reuters