Crude oil prices fell for a fourth day Tuesday as traders continued to price in an upcoming drop in demand.
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Brent crude oil, the international benchmark, fell $2.56 to $39.45 per barrel while West Texas Intermediate crude oil, the U.S. standard, fell $3.41 to $36.36 per barrel. Both energy components were trading at their lowest level in more than two months.
“The rally stalled during the peak demand season,” Stephen Schork, founder and editor of the daily oil subscription newsletter The Schork Report, told FOX Business. “Because of refinery margins and COVID-19, the oncoming demand destruction can be much larger, much longer than usual and that's getting priced into the market now.”
Brent prices topped out at $46.50 a barrel during the weakest part of the winter season and around the same amount during peak demand season. Now, demand is set to decline by up to 1 million barrels per day as producers shut down and retool their operations during the September and October maintenance season.
A second wave of COVID-19 infections could pop up as temperatures drop, leading to further sales erosion.
There is evidence to support that possibility already as Spain has seen its number of daily new infections pass its March peak.
While there likely won’t be the 30 million-barrel-per-day shortfall in demand that occurred when governments all over the world locked down their economies to slow the spread of COVID-19 during the spring, a second wave of infections would cause a prolonged maintenance season.
Producers are already preparing for weaker demand that accompanies that cycle: Saudi Arabia on Monday cut prices for supply to Asia by the most in five months.