Oil prices slip as Covid-19 case surge dents fuel demand hopes

CNBC

REUTERS
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures fell 6 cents, or 0.2%, to $41.21 a barrel at 0130 GMT.
  • Brent crude futures lost 7 cents, also 0.2%, to $43.68 a barrel.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil prices dipped on Thursday as a surge of coronavirus infections around the globe raised fears a rebound in fuel demand would stutter just as major oil producers are set to raise output in August.

U.S. West Texas Intermediate (WTI) crude futures fell 6 cents, or 0.2%, to $41.21 a barrel at 0130 GMT, while Brent crude futures lost 7 cents, also 0.2%, to $43.68 a barrel.

Both benchmark contracts hovered around unchanged levels after having jumped on Wednesday after the U.S. Energy Information Administration reported a sharp, unexpected 10.6 million barrel drop in crude stockpiles last week.

However, at the same time U.S. gasoline and distillate stocks, which include diesel and heating oil, both rose against expectations for inventories to fall – highlighting the patchy nature of the recovery in fuel demand.

“It wasn’t all good news, with signs that demand is still struggling to grow,” ANZ analysts said in a note.

Analysts said the mixed price moves on Thursday were due to demand concerns with COVID-19 infections increasing and raising the prospects for lockdowns to be reimposed.

“As long as we’re recording new daily cases, the risk for oil demand is just too strong,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.

Deaths from COVID-19 topped 150,000 in the United States on Wednesday, while Brazil, with the world’s second-worst outbreak, set new daily records of confirmed cases and deaths. New infections in Australia hit a record on Thursday.

“If we see lockdowns or partial lockdowns, transportation gets hit disproportionately. Transportation accounts for two-thirds of oil demand,” Dhar said.

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.

Oil rises on weaker dollar, but virus woes and U.S.-China tensions weigh

CNBC

REUTERS
KEY POINTS
  • Brent crude rose 15 cents, or 0.4%, to $43.46 a barrel by 0137 GMT, and U.S. West Texas Intermediate (WTI) crude  rose by 12 cents, or 0.3%, to $41.19.
  • The dollar slid to 22-month lows against a basket of currencies. A weaker dollar usually spurs buying of commodities priced in the greenback, like oil, because they become cheaper for holders of other currencies.
  • Barclays Commodities Research has said oil prices could see a correction in the near term if a recovery in fuel demand slows further, especially in the United States.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil edged up on Friday as the dollar fell to an almost two-year low, although demand concerns stemming from rising coronavirus cases and U.S.-China tensions kept a lid on prices.

The dollar slid to 22-month lows against a basket of currencies. A weaker dollar usually spurs buying of commodities priced in the greenback, like oil, because they become cheaper for holders of other currencies.

Brent crude rose 15 cents, or 0.4%, to $43.46 a barrel by 0137 GMT, and U.S. West Texas Intermediate (WTI) crude  rose by 12 cents, or 0.3%, to $41.19.

“Crude prices are attempting to stabilize as expectations still remain high that Congress will be successful in delivering another pandemic relief package” for the United States, said Edward Moya, senior market analyst at OANDA in New York.

“Yesterday’s U.S. economic data showed that the economic recovery is struggling and pretty much guarantees more federal aid is coming.”

The number of Americans filing for unemployment benefits unexpectedly rose to 1.416 million last week for the first time in nearly four months, suggesting U.S. economic recovery is stalling amid a resurgence in COVID-19 cases.

The United States on Thursday recorded over 1,000 deaths from COVID-19, marking the third straight day the nation passed that grim milestone as the pandemic escalates in its southern and western states. Globally, more than 15 million have been infected and over 620,000 have died.

While the rise in infections has fanned fears of renewed government lockdowns, worries that oil demand could be hit have been exacerbated by tensions between the United States and China – the world’s top two oil consumers.

China said the U.S. move to close its Houston consulate this week had “severely harmed” relations and warned it “must” retaliate, without detailing what it would do.

Washington on Tuesday gave China 72 hours to close the consulate, which it said was “to protect American intellectual property and Americans’ private information”, in a dramatic escalation of tension between the world’s two biggest economies.

Barclays Commodities Research has said oil prices could see a correction in the near term if a recovery in fuel demand slows further, especially in the United States.

The bank lowered its oil market surplus forecast for 2020 to an average 2.5 million barrels-per-day (bpd), from 3.5 million bpd previously.

Oil prices steady as clouds gather over fuel demand, looser supply curbs

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures rose 1 cent to $40.76 a barrel at 0204 GMT.
  • Brent crude futures were steady at $43.37 a barrel.
South Belridge Oil Field is the fourth-largest oil field in California and one of the most productive in the U.S.
South Belridge Oil Field is the fourth-largest oil field in California and one of the most productive in the U.S.
David McNew | Getty Images

Oil prices were unchanged on Friday, with trading marked by growing uncertainty about global recovery in fuel demand as new COVID-19 cases surge in several countries just as major producers get set to loosen production curbs.

U.S. West Texas Intermediate (WTI) crude futures rose 1 cent to $40.76 a barrel at 0204 GMT, while Brent crude futures were steady at $43.37 a barrel. Both were still on track to end the week up slightly.

On Thursday, the United States reported at least 75,000 new COVID-19 cases, a new daily record. Spain and Australia reported their steepest daily jumps in more than two months, cases continued to soar in India and Brazil stepped up lockdown measures.

The two benchmark contracts fell 1% on Thursday after the Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, agreed to trim record supply cuts of 9.7 million barrels per day (bpd) imposed earlier this year by some 2 million bpd from August.

But actual output additions will be closer to 1.1 million bpd, as countries like Iraq – which overproduced compared with their commitments to cut supply in May through July – agreed to bigger reductions in August and September.

Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, said the market took some heart with the agreement for some to compensate for previous non-compliance with commitments at a time when there is uncertainty over demand growth.

“They’re taking those precautions. That gives the market confidence that OPEC+ is looking quite closely at those conditions to make sure they don’t push the market in the wrong direction,” he said.

Analysts expect the market to remain in the $40-45 a barrel range, with the looming return of some U.S. supply and uncertainty over fuel demand as new lockdowns may be needed to curb the resurgence of COVID-19 cases.

“The problem with the market right now is prices have got to a level where we’re concerned U.S. supply is going to come back,” Dhar said.

Oil rises after U.S. crude stocks drop, focus on OPEC+ meeting

CNBC

Reuters
KEY POINTS
  • Brent crude futures were up 10 cents, or 0.2%, at $43 a barrel as of 0049 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures rose 14 cents, or 0.4%, to $40.43 a barrel.
Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts demand.
Offshore oil platforms are seen on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts demand.
Michael Heiman | Getty Images

Oil prices rose on Wednesday after a sharp drop in U.S. crude inventories, with the market waiting for more direction from a meeting later in the day on the future level of production by OPEC and its allies.

Brent crude futures were up 10 cents, or 0.2%, at $43 a barrel as of 0049 GMT, and U.S. West Texas Intermediate (WTI) crude futures rose 14 cents, or 0.4%, to $40.43 a barrel.

In a sign of improving demand despite the coronavirus pandemic, U.S. crude inventories fell by 8.3 million barrels in the week to July 10, beating analysts’ expectations for a decline of 2.1 million barrels, according to data from industry group the American Petroleum Institute.

Official data from the U.S. Department of Energy’s Energy Information Administration (EIA) is due on Wednesday.

On supply, the market will be closely watching the Joint Ministerial Monitoring Committee (JMMC) of the Organization of the Petroleum Exporting Countries (OPEC) later on Wednesday.

Key members of OPEC and allies including Russia, a group known as OPEC+, are set to decide whether to extend output cuts of 9.7 million barrels per day (bpd) that end in July or ease them to 7.7 million bpd.

“OPEC+ decision on production cut tapering will set the tone for the oil market,” ANZ Research said in a note.

In June, OPEC and its allies delivered compliance of 107% with their agreed oil output cuts, an OPEC+ source said on Tuesday.

Meanwhile, OPEC said in its monthly report that global oil demand would soar by a record 7 million bpd in 2021 as the global economy recovers from the coronavirus pandemic although it would stay below 2019 levels.

Oil prices drop on demand recovery fears amid U.S. virus surge

CNBC

Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude futures slid 84 cents, or 2.1%, to $39.26 a barrel at 0138 GMT.
  • Brent crude futures fell 77 cents, or 1.8% to $41.95 a barrel.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil prices fell around 2% in early trade on Tuesday on worries that new clampdowns on businesses to stem surging coronavirus cases in California and other U.S. states could threaten the nascent recovery in fuel demand.

U.S. West Texas Intermediate (WTI) crude futures slid 84 cents, or 2.1%, to $39.26 a barrel at 0138 GMT, while Brent crude futures fell 77 cents, or 1.8% to $41.95 a barrel.

Both benchmark contracts lost just over 1% on Monday.

California’s governor on Monday ordered bars to shut and restaurants, movie theatres, zoos and museums in the country’s most populous state to cease indoor operations as coronavirus cases and hospitalizations soared.

The state’s two largest school districts, in Los Angeles and San Diego, also said they would teach only online when school resumes in August.

California’s moves follow the recent reinstatement of some restrictions in other states, such as Florida and Texas.

“With the California soft lockdown now framing the picture, July could be an even more challenging month for oil than expected with even more demand woes emanating from coronavirus-linked uncertainty,” AxiCorp market strategist Stephen Innes, market strategist said in a note.

The market will be closely watching data on fuel consumption due later on Tuesday from the American Petroleum Institute industry group and on Wednesday from the U.S. Energy Information Administration.

Analysts estimate U.S. gasoline stockpiles fell by 900,000 barrels and crude oil inventories fell by 2.3 million barrels in the week to July 10, a preliminary Reuters poll showed.

With fuel demand growth hampered, the market will also be eyeing the next move from the Organization of Petroleum Exporting Countries and its allies, together known as OPEC+, whose market monitoring panel is set to meet on Tuesday and Wednesday.

Under their existing agreement, OPEC+ is set to taper its record supply cut of 9.7 million barrels per day to 7.7 million bpd from August through December.

Citi analysts said implementing the 2 million bpd increase in output from August could weigh on the market given the demand uncertainties, along with the potential for increased Libyan output, a return of 20% to 30% of curbed North American production and an end to China’s crude buying spree.