Oil prices dropped on Monday as a result of the economic gloom caused by the coronavirus pandemic as well as supply cuts by some of the world’s top producers.

Brent crude futures were down 0.9 per cent at $30.68 a barrel by 0431 GMT, while U.S. West Texas Intermediate crude futures fell 0.7 per cent, to $24.57 a barrel.

Though these benchmarks have notched up gains over the past two weeks as countries have eased business and social lockdown, the production of oil worldwide seems to be declining.

Possible signs of a second wave of coronavirus infections in northeast China and South Korea has got investors worried even as more countries begin easing pandemic restrictions could support oil demand.

According to analysts at Goldman Sachs, there is still concern that demand will stay weak in 2021, with worries about the second wave of COVID-19 cases and only a modest increase in personal or corporate travel.

Since the outbreak of the pandemic, Global oil demand has dropped by about 30 per cent.

There are also fears that the U.S. is running out of storage space triggered WTI prices which declined negatively last month. This prompted some U.S. producers to slash output.

According to Tony Nunan, a senior risk manager at Mitsubishi Corp in Tokyo:

“People are surprised by how quickly the U.S. is shutting in production and that’s exactly what we need in order to support prices.

“There are another 10 days before the June contract expires. If the WTI contract can avoid a crash going into expiry, hopefully, we’ve seen the bottom.’’

THE STREET JOURNAL