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Oil Falls for a Third Day With Second-Wave Virus Risks in Focus

(Bloomberg) — Oil kept falling after its first weekly drop since late April as a fresh coronavirus outbreak in China and increases in cases elsewhere added to concern a second wave of infections will threaten a nascent economic recovery.

Futures in New York edged lower toward $35 a barrel after losing 8.3% last week. Beijing closed the city’s largest fruit and vegetable supply center and locked down nearby housing districts over the weekend after dozens of people associated with the market tested positive for the virus. Florida, meanwhile, is among some U.S. states that are still seeing sharp increases in cases.

The supply response to the virus continued, with Baker Hughes data showing active drilling rigs across the U.S. falling for a 13th week to the lowest in more than a decade. OPEC and its allies will review the state of the market this week at an online meeting of the group’s technical committee on Wednesday.

Crude’s six-week rally came to a halt last week amid concerns the worst of the virus isn’t over yet and as the Federal Reserve warned the pandemic could inflict lasting damage on the American economy. Still, supply reductions from OPEC+ and the U.S. have started to bring the market back into balance, suggesting that a repeat of April’s plunge below zero is unlikely.

West Texas Intermediate crude for July settlement fell 2.2% to $35.45 a barrel on the New York Mercantile Exchange as of 8:16 a.m. in Singapore and has lost more than 10% since closing at a three-month high on June 10. Brent for August delivery declined 1.7% to $38.07 on the ICE Futures Europe exchange after dropping by 8.4% last week.

See also: China’s Patchy Aviation Recovery Portends More Pain for Oil

The pace of recovery in prices is likely to slow as the steepest decline in supply and the fastest improvement in demand is probably behind the market, Barclays Plc said in a note Friday. The bank increased its 2020 average price estimates for both Brent and WTI by $4 a barrel to $41 and $37, respectively.

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