Oil prices plunged on Thursday as the rising coronavirus or COVID-19 infections around the world threatened to spoil a recovery in fuel demand just as major oil producers are set to raise the output.

The most-active Brent crude contract for October declined 58 cents, or 1.3 percent, to $43.51 a barrel at 1224 GMT. The September Brent contract that is going to expire on Friday, dropped 57 cents to $43.18 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were down 70 cents, or 1.7 percent, at $40.57 a barrel. Both benchmark contracts rose on Wednesday after the U.S. Energy Information Administration (EIA) reported the largest one-week fall in crude stocks since December.

Oil Prices Fall

Oil industry
Oil industry Pixabay

"The recent resurgence of the coronavirus is an ominous sign that the upside is limited in the immediate future," Tamas Varga of oil brokerage PVM said. Deaths from COVID-19 have now topped 150,000 in the United States, while Brazil, with the world's second-worst outbreak, set daily records of confirmed cases and deaths. New infections in Australia hit a record on Thursday.

The potential hit to the demand rebound comes just as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, are set to step up output in August, adding about 1.5 million barrels per day to global supply.

"The easing OPEC+ supply restrictions combined with the return of some U.S. production may test the resilience of market sentiment in the coming weeks," Stephen Innes, chief global market strategist at AxiCorp said. Total and Royal Dutch Shell reported small profits in the second quarter as their oil trading businesses shielded them from the full force of the pandemic-induced demand loss.

(With agency inputs)