Oil faces a weekly loss on the fear of the second-wave of the coronavirus

Oil has faced the first weekly loss since the end of April. The fear that a second-wave of the coronavirus outbreak could crash a weak recovery is driving oil prices low. 

WTI settled at $36.58 a barrel, and Brent crude closed at $38.90. This week the contract is down by 7.3%.

Recovery from the Coronavirus crisis will be slow

Even though OPEC and its allies agreed on extending record production cuts, market sentiment has turned negative this week. The Federal Reserve stated that the damage coronavirus pandemic has caused is going to last long. The country’s inventories reached record highs. The bank now expects the country’s GDP to fall by 6.5% in 2020.

The US President, Donald Trump, stated that the Federal reserve is often wrong, promising an excellent third and fourth quarter.

After its two-day monetary policy meeting on Wednesday, the Fed released its first pandemic-era outlook. The data seemed to support the gloomy Fed projections, with initial jobless claims having more than doubled from its peak in the Great Depression.

A second rise

The second reason for Thursday’s decline, according to Karl Healing, head of the market strategy at LBBW, is that the market decided to take an interest in the rise in cases of coronavirus contamination outside the northeastern United States.

The United States has had more than 113,000 deaths from the pandemic and more than 2 million people infected. In Texas and North Carolina, the number of hospitalized patients increased over the past month.

According to Healing, it is difficult to say if it’s a real increase in the number of cases, because, lately, more people have been taking tests. 

However, Treasury Secretary Steven Mnuchin said that in the case of a second wave of the coronavirus, the US would not shut down its economy again. Closing the economy is creating more damage, Mnuchin stated.

Containment measures put in place by the federal government and by the states to stop the spread of the coronavirus severely affected the world’s largest economy. They had tens of millions of layoffs since mid-March and an unemployment rate of 13.3% in May.

Crude oil dropped 8.2% on Thursday. This has been the sharpest decline since April when WTI prices slumped to a record low. 

Barclays Plc predicts that the oil market has already seen the quickest improvement in demand and a sharp drop in supply. Any recovery is suspected to be uneven.